Stock Market and No-Dividend Stocks

60 Pages Posted: 16 Feb 2018 Last revised: 3 Jun 2021

See all articles by Adem Atmaz

Adem Atmaz

Purdue University - Krannert School of Management

Suleyman Basak

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2021


We develop a stationary model of the aggregate stock market featuring both dividend-paying and no-dividend stocks within a familiar, parsimonious consumption-based equilibrium framework. We find that such a simple feature leads to profound implications supporting several stock market empirical regularities that leading consumption-based asset pricing models have difficulty reconciling. We show that the presence of no-dividend stocks in the stock market leads to a lower correlation between the stock market return and aggregate consumption growth rate, a non-monotonic and even a negative relation between the stock market risk premium and its volatility, and a downward sloping term structure of equity risk premia. When we quantify these effects, we find them to be economically significant. We also find that no-dividend stocks command lower mean returns but have higher return volatilities and higher market betas than comparable dividend-paying stocks, consistently with empirical evidence. We provide straightforward intuition for all these results and the underlying economic mechanisms at play.

Keywords: Stock market, no-dividend stocks, dynamic asset pricing, incomplete information, stock market correlation with consumption, market risk premium-volatility relation, term structure of equity premia

JEL Classification: G12

Suggested Citation

Atmaz, Adem and Basak, Suleyman, Stock Market and No-Dividend Stocks (June 1, 2021). Journal of Finance, Forthcoming, Available at SSRN: or

Adem Atmaz (Contact Author)

Purdue University - Krannert School of Management ( email )

403 West State Street
West Lafayette, IN 47907
United States


Suleyman Basak

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
44 (0)20 7000 8256 (Phone)
44 (0)20 7000 8201 (Fax)


Centre for Economic Policy Research (CEPR)

United Kingdom

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