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On the Timing and Pricing of DividendsJules H. Van BinsbergenStanford University - Graduate School of Business; National Bureau of Economic Research (NBER) Michael W. BrandtDuke University - Fuqua School of Business; National Bureau of Economic Research (NBER) Ralph S. J. KoijenUniversity of Chicago - Booth School of Business October 7, 2011 CRSP Working Paper Chicago Booth Research Paper No. 10-30 Swiss Finance Institute Research Paper No. 11-13 Abstract: 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.
Number of Pages in PDF File: 38 Keywords: Equity Risk Premium, Pricing Dividends, Trading Dividends, Return Predictability working papers seriesDate posted: February 12, 2010 ; Last revised: October 12, 2011Suggested CitationContact Information
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