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Equity Yields

Listed author(s):
  • Jules Vanbinsbergen

    (Northwestern University)

  • Wouter H. Hueskes

    ()

    (APG Asset Management)

  • Ralph Koijen

    ()

    (New York University)

  • Evert B Vrugt

    ()

    (VU University Amsterdam)

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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File URL: http://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/BFI_2012-007.pdf
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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
Handle: RePEc:bfi:wpaper:2012-007
Contact details of provider: Web page: http://bfi.uchicago.edu/
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