@article {Varela122, author = {Oscar Varela}, title = {The Stock as a Portfolio of Durations: Solving Black{\textquoteright}s Dividend Puzzle Using Black{\textquoteright}s Criteria }, volume = {41}, number = {4}, pages = {122--132}, year = {2015}, doi = {10.3905/jpm.2015.41.4.122}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article addresses the dividend puzzle in the corporate finance literature. It extends existing literature that shows that dividends aren{\textquoteright}t merely puzzling{\textemdash}they matter for the stock{\textquoteright}s duration. Treating stocks as a portfolio of dividends and terminal cash flows, the author shows that the durations of dividends and terminal values are not perfectly negatively correlated, but their values are. The stock{\textquoteright}s value is a perfectly hedged portfolio; the stock{\textquoteright}s duration is not. Dividend policy matters, and stocks with higher dividends have smaller durations and risks.TOPICS: Portfolio management/multi-asset allocation, portfolio theory}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/41/4/122}, eprint = {https://jpm.pm-research.com/content/41/4/122.full.pdf}, journal = {The Journal of Portfolio Management} }