On the Timing and Pricing of Dividends: Web Appendix
Jules H. van Binsbergen
University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)
Michael W. Brandt
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
Ralph S. J. Koijen
London Business School - Department of Finance; Centre for Economic Policy Research (CEPR)
October 7, 2011
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.
Number of Pages in PDF File: 17
Date posted: October 9, 2011
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