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Demographics and the Long-Horizon Returns of Dividend-Yield Strategies in the US

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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 in the US. 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, as consistent with the behavioural life-cycle hypothesis, the 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, time trend and alternative definitions of both dividend-yield strategies as well as demographic variation.

Suggested Citation

  • Lee, King Fuei, 2011. "Demographics and the Long-Horizon Returns of Dividend-Yield Strategies in the US," MPRA Paper 46350, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46350
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Dividend yield; demographics; investment style; investment strategy;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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