Expected Returns , Yield Spreads , and Asset Pricing Tests

@inproceedings{Campello2004ExpectedR,
  title={Expected Returns , Yield Spreads , and Asset Pricing Tests},
  author={M. E. S. Campello and Long Chen and Lu Zhang},
  year={2004}
}
We use yield spreads to construct ex-ante returns on corporate securities, and then use 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… CONTINUE READING
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