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Equity Yields

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  • Jules Vanbinsbergen

    (Northwestern University)

  • Wouter H. Hueskes

    ()
    (APG Asset Management)

  • Ralph Koijen

    ()
    (London Business School)

  • Evert B Vrugt

    ()
    (VU University Amsterdam)

Abstract

We study a new data set of dividend derivatives with maturities up to 10 years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose the equity yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which decomposes the equity risk premium by maturity. We find that the slope of the term structure of risk premia is pro-cyclical, whereas the slope of the term structure of expected dividend growth rates is counter-cyclical. The comovement of yields across regions is on average higher for long-maturity yields than for short-maturity yields, whereas the variation in this comovement is much higher for short-maturity yields.

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Bibliographic Info

Paper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2012-007.

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Date of creation: 2012
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Handle: RePEc:bfi:wpaper:2012-007

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Web page: http://bfi.uchicago.edu/
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Keywords: equity yields; term structure; risk premia; economic activity;

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Cited by:
  1. Ralph S.J. Koijen & Tobias J. Moskowitz & Lasse Heje Pedersen & Evert B. Vrugt, 2013. "Carry," NBER Working Papers 19325, National Bureau of Economic Research, Inc.
  2. Jäckel, Christoph, 2013. "Model uncertainty and expected return proxies," MPRA Paper 51978, University Library of Munich, Germany.

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