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Demographics and the Long-Horizon Returns of Dividend-Yield Strategies in the US

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  • Lee, King Fuei

Abstract

This paper investigates the relationship between demographic changes and the long-run returns of dividend-yield investment strategies in the US. We hypothesise that in a world where components of wealth are mentally treated as being non-fungible, the preference for high dividend-paying stocks by older investors means that the excess returns of high dividend-yielding stocks, relative to other stocks, should be positively related to demographic clientele variation. In particular, we find that, as consistent with the behavioural life-cycle hypothesis, the long-run returns of dividend-yield investment strategies are positively driven by changes in the proportion of the older population. Our results are robust when controlled for the Fama-French factors, inflation rate, consumption growth rate, interest rates, time trend and alternative definitions of both dividend-yield strategies as well as demographic variation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46350.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:46350

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Keywords: Dividend yield; demographics; investment style; investment strategy;

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