AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Implied Dividend Volatility and Expected Growth
AEA Papers and Proceedings
vol. 111,
May 2021
(pp. 361–65)
Abstract
We study the behavior of implied dividend volatility, constructed from the prices of options on index-level dividends, during the COVID-19 pandemic. We use these data to construct a lower bound on expected excess returns on dividend claims and find that the bound moves significantly over time. However, most of the variation in dividend futures prices reflects changes in growth expectations rather than expected excess returns, making them valuable assets to uncover growth expectations. We conclude that the short-term economic outlook is uncertain and not expected to recover in the near term.Citation
Gormsen, Niels J., Ralph S. J. Koijen, and Ian W. R. Martin. 2021. "Implied Dividend Volatility and Expected Growth." AEA Papers and Proceedings, 111: 361–65. DOI: 10.1257/pandp.20211065Additional Materials
JEL Classification
- G35 Payout Policy
- G13 Contingent Pricing; Futures Pricing; option pricing
- I12 Health Behavior
- E66 General Outlook and Conditions
- E44 Financial Markets and the Macroeconomy