VGSF - WU Vienna - LC

Suleyman Basak, London Business School

Campus WU D3.0.225 11:00 - 12:30

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Su­ley­man Ba­sak from the Lon­don Busi­ness School to present his re­search pa­per.
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As­set Prices and No-­Di­vidend Stocks

We in­cor­por­ate stocks that pay no di­vidends into an other­wise stand­ard, parsi­mo­ni­ous dy­namic as­set pri­cing frame­work. We find that such a sim­ple fea­ture leads to pro­found as­set price im­plic­a­tions, which are all sup­por­ted em­pir­ic­ally. In par­tic­u­lar, we demon­strate that no-­di­vidend stocks com­mand lower mean re­turns, but also have higher re­turn volat­il­it­ies and higher mar­ket betas than com­par­able stocks that pay di­vidends. We also show that the pres­ence of no-­di­vidend stocks in the stock mar­ket leads to a lower cor­rel­a­tion between the stock mar­ket re­turn and ag­greg­ate con­sump­tion growth rate, a non-­mono­tonic and even a neg­at­ive re­la­tion between the stock mar­ket risk premium and its volat­il­ity, and a down­ward slop­ing term struc­ture of equity risk premia. We provide straight­for­ward in­tu­ition for all these res­ults and the un­derly­ing eco­nomic mech­an­isms at play.

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