imprint:
Cambridge, Mass: National Bureau of Economic Research, 2019
Published in:NBER working paper series ; no. w25690
Extent:
1 Online-Ressource; illustrations (black and white)
Language:
English
DOI:
10.3386/w25690
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web
Description:
We use traded equity dividend strips from U.S., Europe, and Japan from 2004-2017 to study the slope of the term structure of equity dividend risk premia. In the data, a robust finding is that the term structure of dividend risk premia (growth rates) is positively (negatively) sloped in expansions and negatively (positively) sloped in recessions. We develop a consumption-based regime switching model which matches these robust data-features and the historical probabilities of recession and expansion regimes. The unconditional population term structure of dividend-risk premia in the regime-switching model, as in standard asset pricing models (habits and long-run risks), is increasing with maturity. The regime-switching model also features a declining average term structure of dividend risk-premia if recessions are over-represented in a short sample, as is the case in the data sample from Europe and Japan. In sum, our analysis shows that the empirical evidence in dividend strips is entirely consistent with a positively sloped term structure of dividend risk-premia as implied by standard asset pricing models