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Stock Market and No-Dividend Stocks


Journal of Finance



Authors / Editors

Atmaz A;Basak S


Publication Year



We develop a stationary model of the aggregate stock market featuring both dividend-paying and no-dividend stocks within a familiar, parsimonious consumption-based equilibrium framework. We find that such a simple feature leads to profound implications supporting several stock market empirical regularities that leading consumption-based asset pricing models have difficulty reconciling. Namely, the presence of no-dividend stocks in the stock market leads to a lower correlation between stock market returns and the aggregate consumption growth rate, a nonmonotonic and even negative relation between the stock market risk premium and its volatility, and a downward-sloping term structure of equity risk premia.

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