Dividend Risk Premia

74 Pages Posted: 1 Feb 2016 Last revised: 3 May 2017

See all articles by Georg Cejnek

Georg Cejnek

ZZ Vermögensverwaltung

Otto Randl

WU Vienna University of Economics and Business

Date Written: May 3, 2017

Abstract

This paper studies time variation in the expected excess returns of traded claims on dividends, bonds, and stock indices for international markets. We introduce a novel dividend risk factor that complements the well-known bond risk factor of Cochrane and Piazzesi (2005). When the dividend risk factor and the bond risk factor are employed jointly, our model fits well to variations in subsequent one-year excess returns of dividend swaps and stock indices of the U.S., the U.K., the Eurozone and Japan. By aggregating over the factors of these four core regions, we create global dividend and bond risk factors that capture the excess returns of most developed market MSCI country indices, as well as a variety of other assets including high-yield bonds and a volatility-selling strategy. Our findings highlight the value of information contained in dividend and bond forward curves and suggest substantial co-movement in international risk premia.

Keywords: Dividend derivatives, Cochrane-Piazzesi factor, term structure of equity risk premia, cash flow risk, discount rate risk, global risk factor

JEL Classification: G12, G15

Suggested Citation

Cejnek, Georg and Randl, Otto, Dividend Risk Premia (May 3, 2017). Available at SSRN: https://ssrn.com/abstract=2725073 or http://dx.doi.org/10.2139/ssrn.2725073

Georg Cejnek

ZZ Vermögensverwaltung ( email )

Coburgbastei 4, Top5
Vienna, 1010
Austria
+43151818934 (Phone)

Otto Randl (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria
+ 43 1 313 36 - 5076 (Phone)

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