51 Pages Posted: 8 Sep 2011 Last revised: 15 Sep 2013
Date Written: March 14, 2012
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.
Suggested Citation: Suggested Citation
van Binsbergen, Jules H. and Hueskes, Wouter and Koijen, Ralph S. J. and Vrugt, Evert B., Equity Yields (March 14, 2012). Chicago Booth Research Paper No. 11-33; Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=1923822 or http://dx.doi.org/10.2139/ssrn.1923822