On the Timing and Pricing of Dividends

Binsbergen, Jules H. van; Brandt, Michael W.; Koijen, Ralph S. J.

doi:10.2139/ssrn.1787234

Cited by 119 publications

(194 citation statements)

References 72 publications

(79 reference statements)

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“…The intuition of the model, see also Santos and Veronesi (2010) and Binsbergen, Brandt, and Koijen (2012), is as follows. Risk-averse investors care about maintaining a smooth consumption profile.…”

Section: The Duration-based Explanation Of the Value Premiummentioning

confidence: 99%

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A New Measure of Equity and Cash Flow Duration: The Duration‐Based Explanation of the Value Premium Revisited

Schröder¹,

Esterer²

2016

J of Money Credit Banking

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This article reexamines the duration‐based explanation of the value premium using novel estimates of the firms' equity and cash flow durations based on analyst forecasts. We show that the value premium can be explained by cross‐sectional differences in the shares' equity durations, but not by their cash flow durations. Different from the duration‐based explanation of the value premium that explains the value premium with cross‐sectional differences in the firm's cash flow timing, we find that short‐horizon stocks have lower (expected) returns than long‐horizon stocks. This result is consistent with an upward‐sloping equity yield curve.

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Section: The Duration-based Explanation Of the Value Premiummentioning

confidence: 99%

“…Yet Boguth et al (2013) show that the approach chosen by Binsbergen, Brandt, and Koijen (2012) might overstate their results. Using a more robust analysis, they show that the slope of the term structure of equity yields is less downward sloping than originally thought.…”

mentioning

confidence: 99%

A New Measure of Equity and Cash Flow Duration: The Duration‐Based Explanation of the Value Premium Revisited

Schröder¹,

Esterer²

2016

J of Money Credit Banking

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“…Comparisons of Sharpe ratios thus reflect both the mean and the variance of the log return, and possibly higher-order cumulants as well. Binsbergen, Brandt, and Koijen (2012) and Duffee (2010) are interesting examples. They show that Sharpe ratios for dividends and bonds, respectively, decline with maturity.…”

Section: Appendix B: Entropy and Hansen-jagannathan Boundsmentioning

confidence: 99%

Sources of Entropy in Representative Agent Models

Backus¹,

Chernov²,

Zin

2014

The Journal of Finance

135

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We propose two metrics for asset pricing models and apply them to representative agent models with recursive preferences, habits, and jumps. The metrics describe the pricing kernel's dispersion (the entropy of the title) and dynamics (time dependence, a measure of how entropy varies over different time horizons). We show how each model generates entropy and time dependence and compare their magnitudes to estimates derived from asset returns. This exercise -and transparent loglinear approximations -clarifies the mechanisms underlying these models. It also reveals, in some cases, tension between entropy, which should be large enough to account for observed excess returns, and time dependence, which should be small enough to account for mean yield spreads. JEL Classification Codes: E44, G12.

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“…The importance of including a residual is seen in more recent papers which find that neither long run risks nor habit formation is capable of matching some interesting stylized facts. Van Binsbergen, Brandt, and Koijen (2012) examine dividend strips and equity options, Dew-Becker, Giglio, Le, and Rodriguez (2015) examine variance swaps, and Muir (2015) examines international wars and financial crises. We complement these papers by showing that one does not need to introduce derivative markets nor international data to empirically challenge long run risks and habit formation.…”

Section: Introductionmentioning

confidence: 99%

A Likelihood-Based Comparison of Macro Asset Pricing Models

2016

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We estimate asset pricing models with multiple risks: long-run growth, long-run volatility, habit, and a residual. The Bayesian estimation accounts for the entire likelihood of consumption, dividends, and the pricedividend ratio. We find that the residual represents at least 80% of the variance of the price-dividend ratio. Moreover, the residual tracks most recognizable features of stock market history such as the 1990's boom and bust. Long run risks and habit contribute primarily in crises. The dominance of the residual comes from the low correlation between asset prices and consumption growth moments. We discuss theories which are consistent with our results. * We thank Francesco Bianchi, Ed Herbst, Francisco Palomino, and Missaka Warusawitharana for advice and comments, and Carter Bryson and Chris Campano for excellent research assistance. Our emails are andrew.y.chen, rebecca.d.wasyk, and fabian.winkler, all @frb.gov.The views expressed herein are those of the authors and do not necessarily reflect the position of the Board of Governors of the Federal Reserve or the Federal Reserve System.

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On the Timing and Pricing of Dividends

Cited by 119 publications

References 72 publications

A New Measure of Equity and Cash Flow Duration: The Duration‐Based Explanation of the Value Premium Revisited

A New Measure of Equity and Cash Flow Duration: The Duration‐Based Explanation of the Value Premium Revisited

Sources of Entropy in Representative Agent Models

A Likelihood-Based Comparison of Macro Asset Pricing Models

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