Equity Yields

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Finance Papers
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Finance
Finance and Financial Management
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van Binsbergen, Jules
Hueskes, Wouter
Koijen, Ralph
Vrugt, Evert
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We study a new data set of dividend futures with maturities up to ten 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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2013-12-01
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Journal of Financial Economics
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At the time of publication, author Jules van Binsbergen was affiliated with Stanford University and Tilburg University, The Netherlands. Currently, he is a faculty member at the Wharton School at the University of Pennsylvania.
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