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Changing Risk, Changing Risk Premiums, and Dividend Yield Effects

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  • Chen, Nai-Fu
  • Grundy, Bruce
  • Stambaugh, Robert F

Abstract

The authors investigate the cross-sectional relation between dividend yield and expected return and attempt to include various effects of changing risk measures and changing risk premiums. A stock's risk is measured by its sensitivities to two factors, a market factor and a changing-risk-premium factor. After analyzing dividend-related changes in risk measures, the authors investigate the presence of dividend effects in expected returns using four methods, each imposing a different structure on the temporal behavior of risk measures and risk premiums. For each method, they find no reliable cross-sectional relation between dividend yield and risk-adjusted expected return. Copyright 1990 by the University of Chicago.

Suggested Citation

  • Chen, Nai-Fu & Grundy, Bruce & Stambaugh, Robert F, 1990. "Changing Risk, Changing Risk Premiums, and Dividend Yield Effects," The Journal of Business, University of Chicago Press, vol. 63(1), pages 51-70, January.
    • Handle: RePEc:ucp:jnlbus:v:63:y:1990:i:1:p:s51-70
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