Expected Returns, Yield Spreads, and Asset Pricing Tests
Cornell University; National Bureau of Economic Research (NBER)
Cheung Kong Graduate School of Business
Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)
Simon School Working Paper No. FR 04-04
AFA 2005 Philadelphia Meetings
We use corporate bond yield spreads to gauge investors' return expectations. We then replace standard ex-post, averaged measures of return with our ex-ante return measures in asset pricing assets. We find that the market beta plays a significant role in the cross-section of returns when expectations are measured ex-ante. The expected size and value premia are significantly positive and countercyclical, but there is no evidence of ex-ante positive momentum profits.
Number of Pages in PDF File: 48
Keywords: Expected Returns, Risk Factors, Systematic Risk, Yield Spreads
JEL Classification: G12, E44
Date posted: December 12, 2004
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