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Demographics and the long-horizon returns of dividend-yield strategies

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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. 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, consistent with the behavioural life-cycle hypothesis, 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, tax clienteles, time trend and alternative definitions of both dividend-yield strategies and demographic variation.

Suggested Citation

  • Lee, King Fuei, 2013. "Demographics and the long-horizon returns of dividend-yield strategies," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 202-218.
  • Handle: RePEc:eee:quaeco:v:53:y:2013:i:2:p:202-218
    DOI: 10.1016/j.qref.2013.02.001
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    Cited by:

    1. Kedar-Levy, Haim, 2014. "The potential effect of US baby-boom retirees on stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 30(C), pages 106-121.

    More about this item

    Keywords

    Dividend yield; Demographics; Investment style; Investment strategy;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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