Abstract

Using a panel of international government bond data, I construct fixed income portfolios that match the duration of the dividend strips of the local aggregate stock market index. I find that these bond portfolios have performed as well as their stock counterparts in the past half century while exhibiting similar (and often higher) levels of volatility. These results provide a novel perspective on both the equity risk premium and excess volatility puzzles (bubbles). I present several potential explanations, and discuss further the implications for macroeconomics, monetary economics, asset pricing, and corporate finance. The results cannot be explained away by net stock repurchases or inflation.

General information

This will be a hybrid seminar. If you are interested in joining this seminar, please send an email to the secretariat of the Finance Group at Amsterdam Business School at finsec-abs@uva.nl.