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On the Timing and Pricing of Dividends

  • Jules H. van Binsbergen
  • Michael W. Brandt
  • Ralph S.J. Koijen

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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File URL: http://www.nber.org/papers/w16455.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16455.

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Date of creation: Oct 2010
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Publication status: published as Jules van Binsbergen & Michael Brandt & Ralph Koijen, 2012. "On the Timing and Pricing of Dividends," American Economic Review, American Economic Association, vol. 102(4), pages 1596-1618, June.
Handle: RePEc:nbr:nberwo:16455
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