Finance Papers

Document Type

Journal Article

Date of this Version

6-2012

Publication Source

American Economic Review

Volume

102

Issue

4

Start Page

1596

Last Page

1618

DOI

10.1257/aer.102.4.1596

Abstract

We present evidence on the term structure of the equity premium. We recover prices of dividend strips, which are short-term assets that pay dividends on the stock index every period up to period T and nothing thereafter. It is short-term relative to the index because the index pays dividends in perpetuity. We find that expected returns, Sharpe ratios, and volatilities on short-term assets are higher than on the index, while their CAPM betas are below one. Short-term assets are more volatile than their realizations, leading to excess volatility and return predictability. Our findings are inconsistent with many leading theories.

Copyright/Permission Statement

Copyright © 2012 by the American Economic Association.van Binsbergen, Jules, Michael Brandt, and Ralph Koijen. 2012. "On the Timing and Pricing of Dividends." American Economic Review, 102(4): 1596-1618.

Comments

At the time of publication, author Jules van Binsbergen was affiliated with the Kellogg School of Management, Northwestern University. Currently, he is a faculty member in the finance Department of the Wharton School at the University of Pennsylvania.

Embargo Date

6-2012

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Date Posted: 27 November 2017

This document has been peer reviewed.