PT  - JOURNAL ARTICLE
AU  - Daniele Lamponi
AU  - David Latto
TI  - The Life Cycle of Dividend Futures and the Dividend Risk Premium: <em>A Practitioner’s Perspective</em>
AID  - 10.3905/jwm.2017.20.2.067
DP  - 2017 Jul 31
TA  - The Journal of Wealth Management
PG  - 67--75
VI  - 20
IP  - 2
4099  - https://pm-research.com/content/20/2/67.short
4100  - https://pm-research.com/content/20/2/67.full
AB  - Dividend futures contracts, which allow investors to gain direct exposure to the dividend stream of equity indexes, has recently gained relevance for the investment community. In this article, we discuss their lifecycle and show how they are exposed to multiple factors that drive their prices. For example, far from maturity, their prices are driven by earnings growth and inflation expectations. As the expiration dates approach, the visibility on earnings and dividends improves and prices converge toward realized dividends. We empirically show that this convergence starts between one and two years before expiration.TOPICS: Mutual funds/passive investing/indexing, futures and forward contracts, fundamental equity analysis, performance measurement