This paper studies time variation in the expected excess returns of traded claims on dividends, bonds, and stock indices for international markets. We introduce a novel dividend risk factor that complements the well-known bond risk factor of Cochrane and Piazzesi (2005). When the dividend risk factor and the bond risk factor are employed jointly, our model fits well to variations in subsequent one-year excess returns of dividend swaps and stock indices of the U.S., the U.K., the Eurozone and Japan. By aggregating over the factors of these four core regions, we create global dividend and bond risk factors that capture the excess returns of most developed market MSCI country indices, as well as a variety of other assets including high-yield bonds and a volatility-selling strategy. Our findings highlight the value of information contained in dividend and bond forward curves and suggest substantial co-movement in international risk premia.

Keywords: Dividend derivatives, Cochrane-Piazzesi factor, term structure of equity risk premia, cash flow risk, discount rate risk, global risk factor

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