Demographics and the Long-Horizon Returns of Dividend-Yield Strategies in the US

Lee, King Fuei (2011): Demographics and the Long-Horizon Returns of Dividend-Yield Strategies in the US. Forthcoming in: Quarterly Review of Economics and Finance

Abstract

This paper investigates the relationship between demographic changes and the long-run returns of dividend-yield investment strategies in the US. We hypothesise that in a world where components of wealth are mentally treated as being non-fungible, the preference for high dividend-paying stocks by older investors means that the excess returns of high dividend-yielding stocks, relative to other stocks, should be positively related to demographic clientele variation. In particular, we find that, as consistent with the behavioural life-cycle hypothesis, the long-run returns of dividend-yield investment strategies are positively driven by changes in the proportion of the older population. Our results are robust when controlled for the Fama-French factors, inflation rate, consumption growth rate, interest rates, time trend and alternative definitions of both dividend-yield strategies as well as demographic variation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dividend yield, demographics, investment style, investment strategy
• Subjects: G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G3 - Corporate Finance and Governance > G35 - Payout Policy

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