Based on the fundamental equations of equity valuation, we derive here the relationship
between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for
the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes,
namely, but not specifically, (1) that the current, effective dividend policy is a signalling process, conveying
information on expected profits, (2) an alternative valuation relation, stemming from the above-mentioned dividend
policy, (3) another proof to the notion that the forward-looking equity risk premium is the expected dividend yield
and, finally, (4) a straightforward, analytical explanation for the dividend puzzle and its relation to the
observed decline in both, the dividend yield and the forward-looking equity risk premium.