Dividend Dynamics and the Term Structure of Dividend Strips

Journal of Finance

Volumn 70, Issue 3, 2015, Pages 1115-1160

  Belo, Frederico ^a,b   Collin Dufresne, Pierre ^b,c   Goldstein, Robert S ^a,b  

^a UNIVERSITY OF MINNESOTA   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c SWISS FINANCE INSTITUTE   (Switzerland)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84924687535     PISSN: 00221082     EISSN: 15406261     Source Type: Journal    
DOI: 10.1111/jofi.12242     Document Type: Article

References (69)

1. Abel, Andrew, 1999, Risk premia and term premia in general equilibrium, Journal of Monetary Economics 43, 3-33.
2. Abel, Andrew, 2005, Equity premia with benchmark levels of consumption, leverage, imperfect correlation of consumption and dividends, and distorted beliefs: Closed-form results, Working paper, University of Pennsylvania.
3. Aydemir, A. Cevdet, Michael Gallmeyer, and Burton Hollifield, 2007, Financial leverage and the leverage effect-a market and firm analysis, Working paper, Carnegie Mellon University.
4. Bansal, Ravi, Robert F. Dittmar, and Christian Lundblad, 2001, Consumption, dividends, and the cross section of equity returns, Working paper, Duke University.
5. Bansal, Ravi, and Amir Yaron, 2004, Risks for the long run: A potential resolution of asset pricing puzzles, Journal of Finance 59, 1481-1509.
6. Bansal, Ravi, Robert F. Dittmar, and Dana Kiku, 2009, Cointegration and consumption risks in asset returns, Review of Financial Studies 22, 1343-1375.
7. Bansal, Ravi, Robert F. Dittmar, and Christian Lundblad, 2005, Consumption, dividends, and the cross section of equity returns, Journal of Finance 60, 1639-1672.
8. Bansal, Ravi, Dana Kiku, and Amir Yaron, 2010, Long-run risks, the macroeconomy, and asset prices, American Economic Review: Papers & Proceedings 100, 1343-1375.
9. Bansal, Ravi, Dana Kiku, and Amir Yaron, 2012, An empirical evaluation of the long-run risks model for asset prices, Critical Finance Review 1, 183-221.
10. Beeler, Jason, and John Campbell, 2012, The long-run risks model and aggregate asset prices: An empirical assessment, Critical Finance Review 1, 141-182.
11. Boguth, Oliver, Murray Carlson, Adlai J. Fisher, and Mikhail Simutin, 2011, Dividend strips and the term structure of equity risk premia: A case study of limits to arbitrage, Working paper, University of British Columbia.
12. Boudoukh, Jacob, Roni Michaely, Matthew Richardson, and Michael Roberts, 2007, On the importance of measuring payout yield: Implications for empirical asset pricing, Journal of Finance 62, 877-915.
13. Campbell, John, 2003, Consumption-based asset pricing, in George Constantinides, Milton Harris, and René Stulz, eds.: Handbook of the Economics of Finance (Elsevier Science B.V., North Holland, Amsterdam).
14. Campbell, John, and John Cochrane, 1999, By force of habit: A consumption-based explanation of aggregate stock return behavior, Journal of Political Economy 107, 205-251.
15. Campbell, John, and Robert Shiller, 1988, The dividend-price ratio and expectations of future dividends and discount factors, Review of Financial Studies 1, 195-228.
16. Campbell, John, and Motohiro Yogo, 2006, Efficient tests for stock return predictability, Journal of Financial Economics 81, 27-60.
17. Chen, Long, 2009, On the reversal of dividend and return predictability: A tale of two periods, Journal of Financial Economics 92, 128-151.
18. Chen, Long, Zhi Da, and Richard Priestley, 2012, Dividend smoothing and predictability, Management Science 58, 1834-1853.
19. Cochrane, John H., 1991, Volatility tests and efficient markets: A review essay, Journal of Monetary Economics 27, 463-485.
20. Cochrane, John H., 2007, Financial markets and the real economy, in Rajnish Mehra, ed.: Handbook of the Equity Premium (Elsevier, Amsterdam).
21. Cochrane, John H., 2008, The dog that did not bark: A defense of return predictability, Review of Financial Studies 21, 1533-1575.
22. Cochrane, John H., 2011, Discount rates, Journal of Finance 66, 1047-1108.
23. Collin-Dufresne, Pierre, and Robert S. Goldstein, 2001, Do credit spreads reflect stationary leverage ratios?, Journal of Finance 56, 1929-1957.
24. Croce, Max, Martin Lettau, and Sydney C. Ludvigson, 2009, Investor information, long-run risk, and the duration of risky cash-flows, Working paper, UC Berkeley.
25. Duffie, Darrell, and Rui Kan, 1996, A yield-factor model of interest rates, Mathematical Finance 6, 379-406.
26. Engle, Robert, and Clive Granger, 1987, Co-integration and error-correction: Representation, estimation and testing, Econometrica 55, 251-276.
27. Epstein, Larry G., and Stanley E. Zin, 1989, Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework, Econometrica 57, 937-969.
28. Fama, Eugene F., and Kenneth R. French, 1989, Business conditions and expected returns on stocks and bonds, Journal of Financial Economics 25, 23-49.
29. Fama, Eugene F., and Kenneth R. French, 2001, Disappearing dividends: Changing firm characteristics or lower propensity to pay, Journal of Financial Economics 60, 3-43.
30. Fama, Eugene F., and Kenneth R. French, 2002, Testing trade-off and pecking order predictions about dividends and debt, Review of Financial Studies 15, 1-33.
31. Ferson, Wayne E., and Campbell R. Harvey, 1999, Conditioning variables and the cross section of stock returns, Journal of Finance 54, 1325-1360.
32. Fischer, Edwin O., Robert Heinkel, and Josef Zechner, 1989, Dynamic capital structure choice, Journal of Finance 44, 19-40.
33. Flannery, Mark J., and Kasturi P. Rangan, 2006, Partial adjustment toward target capital structures, Journal of Financial Economics 79, 469-506.
34. Frank, Murray Z., and Vidhan K. Goyal, 2008, Trade-off and Pecking Order Theories of Debt (Elsevier Science, North-Holland Amsterdam).
35. Goldstein, Robert S., Nengjiu Ju, and Hayne Leland, 2001, An EBIT-based model of dynamic capital structure, Journal of Business 74, 483-512.
36. Gourieroux, Christian, Alain Monfort, and Victor Polimenis, 2007, Affine term structure models, Working paper, CREST.
37. Graham, John, and Campbell Harvey, 2001, The theory and practice of corporate finance: Evidence from the field, Journal of Financial Economics 60, 187-243.
38. Grullon, Gustavo, and Roni Michaely, 2002, Dividends, share repurchases, and the substitution hypothesis, Journal of Finance 57, 1649-1684.
39. Hansen, Lars Peter, John C. Heaton, and Nan Li, 2008, Consumption strikes back? Measuring long-run risk, Journal of Political Economy 116, 260-302.
40. Koijen, Ralph, and Stijn Van Nieuwerburgh, 2011, Predictability of stock returns and cash flows, Annual Review of Financial Economics 3, 467-491.
41. Lambrecht, Bart M., and Stewart C. Myers, 2012, A Lintner model of payout and managerial rents, Journal of Finance 67, 1761-1810.
42. Larrain, Borja, and Motohiro Yogo, 2008, Does firm value move too much to be justified by subsequent changes in cash flow?, Journal of Financial Economics 87, 200-226.
43. Le, Anh, Kenneth J. Singleton, and Qiang Dai, 2010, Discrete-time affine Q term structure models with generalized market prices of risk, Review of Financial Studies 23, 2184-2227.
44. LeRoy, Stephen F., and Richard D. Porter, 1981, The present-value relation: Tests based on implied variance bounds, Econometrica 49, 555-574.
45. Lettau, Martin, and Sydney C. Ludvigson, 2002, Time-varying risk premia and the cost of capital: An alternative implication of the q theory of investment, Journal of Monetary Economics 49, 31-66.
46. Lettau, Martin, and Sydney C. Ludvigson, 2010, Measuring and modeling variation in the risk-return tradeoff, in Yacine Aït-Sahalia and Lars Peter Hansen, eds.: Handbook of Financial Econometrics (Elsevier Science B.V., North Holland, Amsterdam).
47. Lettau, Martin, and Jessica A. Wachter, 2007, Why is long-horizon equity less risky? A duration-based explanation of the value premium, Journal of Finance 62, 55-92.
48. Lettau, Martin, and Jessica A. Wachter, 2011, The term structures of equity and interest rates, Journal of Financial Economics 101, 90-113.
49. Lintner, John, 1956, Distribution of incomes of corporations among dividends, retained earnings and taxes, American Economic Review 46, 97-113.
50. Lo, Andrew W., and A. Craig MacKinlay, 1988, Stock market prices do not follow random walks: Evidence from a simple specification test, Review of Financial Studies 1, 41-66.
51. Ludvigson, Sydney C., 2012, Advances in consumption-based asset pricing: Empirical tests, in George Constantinides, Milton Harris, and René Stulz, eds.: Handbook of the Economics of Finance (Elsevier Science B.V., North Holland, Amsterdam).
52. Marsh, Terry, and Robert Merton, 1986, Dividend variability and variance bounds tests for the rationality of stock market prices, American Economic Review 76, 483-498.
53. Mead, Charles Ian, Brent R. Moulton, and Kenneth Petrick, 2004, NIPA corporate profits and reported earnings: A comparison and measurement issues, Working paper, Bureau of Economic Analysis.
54. Menzly, Lior, Tano Santos, and Pietro Veronesi, 2004, Understanding predictability, Journal of Political Economy 112, 1-47.
55. Miles, James A., and John R. Ezzell, 1980, The weighted average cost of capital, perfect capital markets and project life: A clarification, Journal of Financial and Quantitative Analysis 15, 719-730.
56. Modigliani, Franco, and Merton H. Miller, 1958, The cost of capital, corporation finance, and the theory of investment, American Economic Review 48, 261-297.
57. Modigliani, Franco, and Merton H. Miller, 1961, Dividend policy, growth and the valuation of shares, Journal of Business 34, 411-433.
58. Newey, Whitney K., and Kenneth D. West, 1987, A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix, Econometrica 55, 703-708.
59. Opler, Tim, and Sheridan Titman, 1997, The debt-equity choice: An analysis of issuing firms, Working paper, Ohio State University.
60. Santos, Tano, and Pietro Veronesi, 2006, Labor income and predictable stock returns, Review of Financial Studies 19, 1-44.
61. Schulz, Florian, 2013, On the timing and pricing of dividends: Revisiting the term structure of the equity risk premium, Working paper, UCLA Anderson School of Management.
62. Shiller, Robert, 1981, Do stock prices move too much to be justified by subsequent changes in dividends?, American Economic Review 71, 421-436.
63. Shiller, Robert, 1986, The Marsh-Merton model of managers' smoothing of dividends, American Economic Review 76, 499-503.
64. Spiegel, Matthew, 2008, Forecasting the equity premium: Where we stand today, Review of Financial Studies 21, 1453-1454.
65. Stambaugh, Robert F., 1999, Predictive regressions, Journal of Financial Economics 54, 375-421.
66. Titman, Sheridan, and Sergey Tsyplakov, 2007, A dynamic model of optimal capital structure, Review of Financial Studies 11, 401-451.
67. van Binsbergen, Jules H., Michael W. Brandt, and Ralph S. J. Koijen, 2012, On the timing and pricing of dividends, American Economic Review 102, 1596-1618.
68. van Binsbergen, Jules H., Wouter Hueskes, Ralph S. J. Koijen, and Evert B. Vrugt, 2013, Equity yields, Journal of Financial Economics 110, 503-519.
69. Wright, Stephen, 2004, Measures of stock market value and returns for the U.S. nonfinancial corporate sector, 1900-2002, Review of Income and Wealth 50, 561-584.