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Serhiy Kozak, Assistant Professor of Finance, University of Maryland: Equity Term Structures without Dividend Strips Data

Time: 2020-10-27 08:42 Print

Topic: Equity Term Structures without Dividend Strips Data

Speaker: Serhiy Kozak, Assistant Professor of Finance, R.H. Smith School of Business, University of Maryland

Date: October 28, 2020 (Wednesday)

Time: 09:00-10:30

Location: 4-101

Language: English

Abstract:

We use a large cross-section of equity returns to estimate a rich affine model of equity prices, dividends, returns and their dynamics. Using the model, we price dividend strips of the aggregate market index, as well as any other well-diversified equity portfolio. We do not use any dividend strips data in the estimation of the model; however, model-implied equity yields generated by the model match closely the equity yields from the traded dividend forwards reported in the literature. Our model can therefore be used to extend the data on the term structure of discount rates in three dimensions: (i) over time, back to the 1970s; (ii) across maturities, since we are not limited by the maturities of actually traded dividend claims; and most importantly, (iii) across portfolios, since we generate a term structure for any portfolio of stocks (e.g., small or value stocks). The new term structure data generated by our model (e.g., separate term structures for value, growth, investment and other portfolios, observed over a span of 45 years that covers several recessions) represent new empirical moments that can be used to guide and evaluate asset pricing models.

About the speaker:

Serhiy is an assistant professor of finance at the R.H. Smith School of Business at the University of Maryland. Prior to that, he was an assistant professor of finance at the University of Michigan, Ross School of Business. His current research focuses on embedding economic and asset pricing restrictions into machine learning methods to study dynamics of asset prices. Serhiy earned his PhD at the University of Chicago in 2013.