Expected Returns, Yield Spreads, and Asset Pricing Tests
48 Pages Posted: 12 Dec 2004
There are 4 versions of this paper
Expected Returns, Yield Spreads, and Asset Pricing Tests
Expected Returns, Yield Spreads, and Asset Pricing Tests
Expected Returns, Yield Spreads, and Asset Pricing Tests
Expected Returns, Yield Spreads, and Asset Pricing Tests
Date Written: January 2006
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 Classification: G12, E44
Suggested Citation: Suggested Citation
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