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Expected Returns, Yield Spreads, and Asset Pricing Tests

Listed author(s):
  • Murillo Campello
  • Long Chen
  • Lu Zhang

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.

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File URL: http://www.nber.org/papers/w11323.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11323.

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Date of creation: May 2005
Publication status: published as Murillo Campello & Long Chen & Lu Zhang, 2008. "Expected returns, yield spreads, and asset pricing tests," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(3), pages 1297-1338, May.
Handle: RePEc:nbr:nberwo:11323
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