IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/1142.html
   My bibliography  Save this paper

Debt and Equity Yields: 1926-80

Author

Listed:
  • Patric H. Hendershott
  • Roger D. Huang

Abstract

The study is divided into four broad parts, beginning with an exploratory analysis of the data on expost returns on corporate equities and bonds for the 1926-80 period. In Part 2, we estimate the relationships between one-month expost returns on corporate bonds and equities andvariations in Treasury bill rates, economic activity, and other variables.The major other variable is unanticipated changes in new issue coupon rates on long-term Treasury bonds. Parts 3 and 4 contain econometric investigations of the determinants of one-month Treasury bill rates and unanticipated changes in long-term Treasury coupon rates, respectively. These parts extend the analysis of Part 2 by explaining variables that determine expost corporate bond and equity returns and provide evidence on the determination of new-issue yields on short- and long-term default-free debt. The last three parts ofthe study report econometric results based on data from the 1953-83 period.A number of important issues are addressed in the econometric parts of the paper. These include: the validity of the Modigliani-Cohn valuation-error hypothesis, the measurement of Merton's "excess return on the market", the relationship between real new-issue debt rates and real economic activity, and the usefulness of the Livingston survey data in explaining financial returns.

Suggested Citation

  • Patric H. Hendershott & Roger D. Huang, 1983. "Debt and Equity Yields: 1926-80," NBER Working Papers 1142, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1142
    Note: ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w1142.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Frederic S. Mishkin, 1978. "Efficient-Markets Theory: Implications for Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 707-752.
    2. Nelson, Charles R, 1976. "Inflation and Rates of Return on Common Stocks," Journal of Finance, American Finance Association, vol. 31(2), pages 471-483, May.
    3. Malkiel, Burton G, 1979. "The Capital Formation Problem in the United States," Journal of Finance, American Finance Association, vol. 34(2), pages 291-306, May.
    4. Martin Feldstein, 1983. "Inflation and the Stock Market," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 186-198 National Bureau of Economic Research, Inc.
    5. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-282, June.
    6. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    7. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-470, May.
    8. Fama, Eugene F, 1977. "Interest Rates and Inflation: The Message in the Entrails," American Economic Review, American Economic Association, vol. 67(3), pages 487-496, June.
    9. McCulloch, J Huston, 1975. "The Tax-Adjusted Yield Curve," Journal of Finance, American Finance Association, vol. 30(3), pages 811-830, June.
    10. Garbade, Kenneth & Wachtel, Paul, 1978. "Time variation in the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 4(4), pages 755-765, November.
    11. Alan S. Blinder, 1980. "The Consumer Price Index and the Measurement of Recent Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(2), pages 539-573.
    12. Hendershott, Patric H. & Cheng Hu, Sheng, 1981. "Inflation and extraordinary returns on owner-occupied housing: Some implications for capital allocation and productivity growth," Journal of Macroeconomics, Elsevier, vol. 3(2), pages 177-203.
    13. John A. Carlson, 1977. "A Study of Price Forecasts," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 6, number 1, pages 27-56 National Bureau of Economic Research, Inc.
    14. Melvin, Michael, 1982. "Expected Inflation, Taxation, and Interest Rates: The Delusion of Fiscal Illusion," American Economic Review, American Economic Association, vol. 72(4), pages 841-845, September.
    15. Jaffe, Jeffrey F & Mandelker, Gershon, 1976. "The "Fisher Effect" for Risky Assets: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 31(2), pages 447-458, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1142. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.