41 Pages Posted: 13 Jun 2005
Date Written: May 2005
We use yield spreads to construct ex-ante returns on corporate securities, and then use the ex-ante returns in asset pricing assets. Differently from the standard approach, our tests do not use ex-post average returns as a proxy for expected returns. We find that the market beta plays a much more important role in the cross-section of expected returns than previously reported. The expected value premium is significantly positive and countercyclical. We find no evidence of ex-ante positive momentum profits.
Suggested Citation: Suggested Citation
Campello, Murillo and Chen, Long and Zhang, Lu, Expected Returns, Yield Spreads, and Asset Pricing Tests (May 2005). NBER Working Paper No. w11323. Available at SSRN: https://ssrn.com/abstract=720409