Expected Returns, Yield Spreads, and Asset Pricing Tests

41 Pages Posted: 13 Jun 2005 Last revised: 11 Dec 2022

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: May 2005

Abstract

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

Campello, Murillo and Chen, Long 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

Murillo Campello

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

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Long Chen

Cheung Kong Graduate School of Business ( email )

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Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

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National Bureau of Economic Research (NBER)

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United States

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