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Equity Yields

52 Pages Posted: 27 Jan 2011 Last revised: 15 Sep 2013

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Wouter Hueskes

APG Asset Management

Ralph S. J. Koijen

New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Evert B. Vrugt

VU University Amsterdam, PGO-IM

Multiple version iconThere are 3 versions of this paper

Date Written: March 14, 2012

Abstract

We study a new data set of dividend derivatives with maturities up to 10 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.

Keywords: Growth expectations, Equity risk premium, Term structure of equity

Suggested Citation

van Binsbergen, Jules H. and Hueskes, Wouter and Koijen, Ralph S. J. and Vrugt, Evert B., Equity Yields (March 14, 2012). Becker Friedman Institute for Research in Economics Working Paper No. 2012-007. Available at SSRN: https://ssrn.com/abstract=1748862 or http://dx.doi.org/10.2139/ssrn.1748862

Jules H. Van Binsbergen (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

Wouter Hueskes

APG Asset Management ( email )

Schiphol Boulevard 239
1118 BH Schiphol
Netherlands

Ralph S. J. Koijen

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

HOME PAGE: http://www.koijen.net

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Evert B. Vrugt

VU University Amsterdam, PGO-IM ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

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