The Predictive Power of the Dividend Risk Premium

Avino, DE ORCID: 0000-0002-5314-2067, Stancu, Andrei and Wese Simen, Chardin ORCID: 0000-0003-4119-3024 (2021) The Predictive Power of the Dividend Risk Premium. Journal of Financial and Quantitative Analysis, 56 (8). pp. 2843-2869.

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Abstract

<jats:title>Abstract</jats:title><jats:p>We show that the dividend growth rate implied by the options market is informative about i) the expected dividend growth rate and ii) the expected dividend risk premium. We model the expected dividend risk premium and explore its implications for the predictability of dividend growth and stock market returns. Correcting for the expected dividend risk premium strengthens the evidence for the predictability of dividend growth and stock market returns both in and out of sample. Economically, a market-timing investor who accounts for the time-varying expected dividend risk premium realizes an additional utility gain of 2.02% per year.</jats:p>

Item Type:	Article
Additional Information:	Source info: Journal of Financial and Quantitative Analysis, Forthcoming
Uncontrolled Keywords:	Dividend risk premium, dividend strip, predictability, present value model
Depositing User:	Symplectic Admin
Date Deposited:	12 Apr 2019 13:34
Last Modified:	19 Jan 2023 00:54
DOI:	10.1017/S0022109020000733
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3036628