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Dividend Risk Premia

Published online by Cambridge University Press:  16 April 2019

Georg Cejnek  and
Otto Randl Open the ORCID record for Otto Randl [Opens in a new window]
Georg Cejnek
Affiliation:
Cejnek, [email protected], ZZ Vermögensverwaltung
Otto Randl*
Affiliation:
Randl, [email protected], WU Vienna University of Economics and Business
*
Randl (corresponding author), [email protected]
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Abstract

This article studies time variation in the expected excess returns of traded claims on dividends, bonds, and stock indices for international markets. We introduce a novel dividend risk factor that complements the bond risk factor of Cochrane and Piazzesi (2005). By aggregating over 4 regions (United States, United Kingdom, Eurozone, and Japan), we create global dividend and bond factors. Our global 2-factor model captures the excess returns of most Morgan Stanley Capital International (MSCI) country indices, as well as a variety of other test assets. Our findings highlight the value of the information contained in dividend and bond forward curves and suggest substantial comovement in international risk premia.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 55 , Issue 4 , June 2020 , pp. 1199 - 1242
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2019

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Footnotes

We thank Christian Mueller-Glissmann at Goldman Sachs and Saverio Simonelli at Now-Casting Economics Limited for providing us with data. We appreciate valuable comments by an anonymous referee, Tim Adam, Jules van Binsbergen (discussant), Engelbert Dockner, Andrea Jacob (discussant), Christian Laux, Alfred Lehar, Stig Vinther Møller (discussant), Leopold Sögner, Alex Stomper, Neal Stoughton, Erik Theissen (discussant), Christian Wagner, and Josef Zechner as well as seminar participants at the 2017 American Finance Association (AFA) Meeting, the 2017 German Finance Association (DGF) Meeting, the 2017 Swiss Society for Financial Market Research (SGF) Meeting, AWG Klagenfurt, WU Vienna, the University of Calgary, Humboldt University Berlin, and the University of Bologna.

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