48 Pages Posted: 12 Dec 2004
Date Written: January 2006
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
Campello, Murillo and Chen, Long and Zhang, Lu, Expected Returns, Yield Spreads, and Asset Pricing Tests (January 2006). Simon School Working Paper No. FR 04-04; AFA 2005 Philadelphia Meetings. Available at SSRN: https://ssrn.com/abstract=491403 or http://dx.doi.org/10.2139/ssrn.491403