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Equity yields

Listed author(s):
  • van Binsbergen, Jules
  • Hueskes, Wouter
  • Koijen, Ralph
  • Vrugt, Evert

We study a new data set of dividend futures with maturities up to ten 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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File URL: http://www.sciencedirect.com/science/article/pii/S0304405X13002316
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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 110 (2013)
Issue (Month): 3 ()
Pages: 503-519

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Handle: RePEc:eee:jfinec:v:110:y:2013:i:3:p:503-519
DOI: 10.1016/j.jfineco.2013.08.017
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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