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Expected Returns, Yield Spreads, and Asset Pricing Tests
Murillo Campello University of Illinois at Urbana, Champaign - Department of Finance; National Bureau of Economic Research (NBER) Long Chen Washington University, St. Louis Lu Zhang University of Michigan - Stephen M. Ross School of Business; National Bureau of Economic Research (NBER) January 2006 Simon School Working Paper No. FR 04-04 AFA 2005 Philadelphia Meetings Abstract: 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.
Keywords: Expected Returns, Risk Factors, Systematic Risk, Yield Spreads JEL Classifications: G12, E44 Working Paper SeriesDate posted: December 12, 2004 ; Last revised: September 16, 2009Suggested CitationContact Information
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