Reinvestment Risk and the Equity Term Structure

• 成果类型: Article
• 署名作者: Goncalves, Andrei S.
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of North Carolina School of Medicine
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13035
• 发表日期: 2021
• 页码: 2153-2197
• 关键词: ASSET RETURNS; long-run; PREDICTIVE REGRESSIONS; temporal behavior; stock returns; consumption; Dividends; duration; MARKET; MODEL

摘要

The equity term structure is downward sloping at long maturities. I estimate an Intertemporal Capital Asset Pricing Model (ICAPM) to show that the trade-off between market and reinvestment risk explains this pattern. Intuitively, while long-term dividend claims are highly exposed to market risk, they are good hedges for reinvestment risk because dividend prices rise as expected returns decline, and longer-term claims are more sensitive to discount rates. In the estimated ICAPM, reinvestment risk dominates at long maturities, inducing relatively low risk premia on long-term dividend claims. The model is also consistent with the equity term structure cyclicality and the upward-sloping bond term structure.