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On the Timing and Pricing of Dividends

Author Info

Listed author(s):
  • Jules H. van Binsbergen

    (Northwestern Kellogg, Stanford GSB, and NBER)

  • Michael W. Brandt

    (Duke University and NBER)

  • Ralph S.J. Koijen

    (Chicago Booth and NBER)

Abstract

We recover prices of dividend strips on the aggregate stock market using data from derivatives markets. The price of a k-year dividend strip is the present value of the dividend paid in k years. The value of the stock market is the sum of all dividend strip prices across maturities. We study the properties of strips and find that expected returns, Sharpe ratios, and volatilities on short-term strips are higher than on the aggregate stock market, while their CAPM betas are well below one. Short-term strip prices are more volatile than their realizations, leading to excess volatility and return predictability.

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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 11-13.

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Length: 50 pages
Date of creation:
Handle: RePEc:chf:rpseri:rp1113
Contact details of provider: Web page: http://www.SwissFinanceInstitute.ch

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Keywords: Equity Risk Premium; Dividend Strips; Consumption-Based Asset Pricing;

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Find related papers by JEL classification:
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • G0 - Financial Economics - - General
  • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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