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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. KoijenLondon Business School - Department of Finance; National Bureau of Economic Research (NBER) March 31, 2011 MFI Working Paper No. 210-010 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: 49 Keywords: Equity risk premium, dividend strips, excess volatility JEL Classification: E3, G1 Accepted Paper SeriesDate posted: November 17, 2010 ; Last revised: April 2, 2011Suggested CitationContact Information
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