TY - JOUR
T1 - Equity duration and predictability
AU - Golez, Benjamin
AU - Koudijs, Peter
N1 - Publisher Copyright: © 2025 The Author(s)
PY - 2025/10
Y1 - 2025/10
N2 - After 1945, expected returns have started to dominate the variation in equity price movements, leaving little room for expected dividend growth. An increase in equity duration can help explain this change. Expected returns vary more for payouts further into the future. Furthermore, because expected returns are more persistent than growth rates, they are more important for longer-duration assets. We provide empirical support for this explanation across three datasets: dividend strips, the long time series for the aggregate market, and the cross-section of stocks. A simple present value model with time-varying duration can largely explain the post-1945 dominance of expected returns.
AB - After 1945, expected returns have started to dominate the variation in equity price movements, leaving little room for expected dividend growth. An increase in equity duration can help explain this change. Expected returns vary more for payouts further into the future. Furthermore, because expected returns are more persistent than growth rates, they are more important for longer-duration assets. We provide empirical support for this explanation across three datasets: dividend strips, the long time series for the aggregate market, and the cross-section of stocks. A simple present value model with time-varying duration can largely explain the post-1945 dominance of expected returns.
UR - http://www.scopus.com/inward/record.url?scp=105007749698&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2025.104114
DO - 10.1016/j.jfineco.2025.104114
M3 - Article
AN - SCOPUS:105007749698
SN - 0304-405X
VL - 172
JO - Journal of Financial Economics
JF - Journal of Financial Economics
M1 - 104114
ER -