Equity yields |
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Authors: | Jules van Binsbergen Wouter Hueskes Ralph Koijen Evert Vrugt |
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Affiliation: | 1. Stanford GSB, United States;2. NBER, United States;3. Tilburg University, The Netherlands;4. Blenheim Capital Management BV, The Netherlands;5. London Business School, United Kingdom;6. VU University Amsterdam, PGO-IM, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands |
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Abstract: | 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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