The Relationship Between the Equity Risk Premium, Duration and Dividend Yield
نویسنده
چکیده
Based on the fundamental equations of equity valuation, we derive here the relationship between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes, namely, but not specifically, (1) that the current, effective dividend policy is a signalling process, conveying information on expected profits, (2) an alternative valuation relation, stemming from the above-mentioned dividend policy, (3) another proof to the notion that the forward-looking equity risk premium is the expected dividend yield and, finally, (4) a straightforward, analytical explanation for the dividend puzzle, as well as for the observed decline in both, the dividend yield and the forward-looking equity risk premium. 1 April 2002. Printed in Wilmott Magazine, pp. 84-97 (December 2002). Also available at: http://rdcohen.50megs.com/ERPabstract.html . 2 I express these views as an individual, not as a representative of companies with which I am connected. 3 E-mail: [email protected] Phone: +44(0)207 986 4645.
منابع مشابه
Ruben D . Cohen 3 Corporate Finance – Structured Products , Citigroup 33 Canada Square , London E 14 5 LB United Kingdom The Relationship between the Equity Risk Premium , Duration and Dividend Yield
Based on the fundamental equations of equity valuation, we derive here the relationship between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes, namely, but not specifically, (1) that the current, effective dividend policy is a signall...
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