Equity duration and predictability

Benjamin Golez*, Peter Koudijs

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

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.

Original languageEnglish
Article number104114
JournalJournal of Financial Economics
Volume172
DOIs
Publication statusPublished - Oct 2025

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Publisher Copyright: © 2025 The Author(s)

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