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Equity Yields

Author

Listed:
  • Jules Vanbinsbergen

    (Northwestern University)

  • Wouter H. Hueskes

    () (APG Asset Management)

  • Ralph Koijen

    () (New York University)

  • 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.

Suggested Citation

  • Jules Vanbinsbergen & Wouter H. Hueskes & Ralph Koijen & Evert B Vrugt, 2012. "Equity Yields," Working Papers 2012-007, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2012-007
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    File URL: https://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/BFI_2012-007.pdf
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    Other versions of this item:

    • Jules H. van Binsbergen & Wouter Hueskes & Ralph Koijen & Evert B. Vrugt, 2011. "Equity Yields," NBER Working Papers 17416, National Bureau of Economic Research, Inc.

    References listed on IDEAS

    as
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    More about this item

    Keywords

    equity yields; term structure; risk premia; economic activity;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F01 - International Economics - - General - - - Global Outlook
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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