Equity Yields

42 Pages Posted: 21 Sep 2011

See all articles by Jules H. van Binsbergen

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

University of Chicago - Booth School of Business; 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: September 2011

Abstract

We study a new data set of prices of traded dividends 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 these yields to obtain a term structure of expected dividend growth rates and a term structure of risk premia, which allows us to decompose the equity risk premium by maturity. We find that both expected dividend growth rates and risk premia exhibit substantial variation over time, particularly for short maturities. In addition to predicting dividend growth, equity yields help predict other measures of economic growth such as consumption growth. We relate the dynamics of growth expectations to recent events such as the financial crisis and the earthquake in Japan.

Suggested Citation

van Binsbergen, Jules H. and Hueskes, Wouter and Koijen, Ralph S. J. and Vrugt, Evert B., Equity Yields (September 2011). NBER Working Paper No. w17416. Available at SSRN: https://ssrn.com/abstract=1931188

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
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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

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/ralph.koijen/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Evert B. Vrugt

VU University Amsterdam, PGO-IM ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

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