Expected Returns, Yield Spreads, and Asset Pricing Tests

52 Pages Posted: 7 Nov 2007

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Long Chen

Cheung Kong Graduate School of Business

Lu Zhang, 张橹

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Abstract

We construct firm-specific measures of expected equity returns using corporate bond yields, and replace standard ex-post average returns with our expected-return measures in asset pricing tests. We find that the market beta is significantly priced in the cross-section of expected returns. The expected size and value premia are positive and countercyclical, but there is no evidence of positive expected momentum profits.

Keywords: Expected returns, risk factors, systematic risk, yield spreads

JEL Classification: G12, E44

Suggested Citation

Campello, Murillo and Chen, Long and Zhang, Lu, Expected Returns, Yield Spreads, and Asset Pricing Tests. Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1026946

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

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HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138

Long Chen (Contact Author)

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Lu Zhang

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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