Expected returns, yield spreads, and asset pricing tests

Murillo Campello; Long Chen; Lu Zhang

doi:10.1093/rfs/hhn011

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Review of Financial Studies Vol. 21 No. 3 2008

Expected returns, yield spreads, and asset pricing tests

Murillo Campello¹; Long Chen²; Lu Zhang³

¹ University of Illinois and NBER · ² Michigan State University · ³ University of Michigan–Ann Arbor

Abstract

We construct firm-specific measures of expected equity returns using corporate bond yields, and replace standard ex post average returns with our expected-return measures in asset pricing tests. We find that the market beta is significantly priced in the cross section of expected returns. The expected size and value premiums are positive and countercyclical, but there is no evidence of positive expected momentum profits. The Author 2008. Published by Oxford University Press on behalf of the Society for Financial Studies. All rights reserved. For permissions, please e-mail: [email protected]., Oxford University Press.

DOI: 10.1093/rfs/hhn011
Volume: 21
Issue: 3
Pages: 1297-1338
Language: en
Sources: openalex crossref

Expected returns, yield spreads, and asset pricing tests

Abstract

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