Expected Returns, Yield Spreads, and Asset Pricing Tests

48 Pages Posted: 12 Dec 2004

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; Luohan Academy

Lu Zhang

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

Multiple version iconThere are 4 versions of this paper

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

Campello, Murillo and Chen, Long 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

Murillo Campello

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

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National Bureau of Economic Research (NBER) ( email )

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Long Chen

Cheung Kong Graduate School of Business ( email )

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Luohan Academy ( email )

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Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

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585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

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United States

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