Using Yield Spreads to Estimate Expected Returns on Debt and Equity
نویسندگان
چکیده
منابع مشابه
Expected Returns, Yield Spreads, and Asset Pricing Tests
We use information contained in yield spreads to recover investors ex ante required rates of return on corporate securities, and then use these ex ante returns to study the pricing of risky assets. Differently from the standard approach, our asset pricing tests do not rely on the use of ex post average equity returns as proxies for expected equity returns. We Þnd that: (i) the market beta play...
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To save space, we present some of our …ndings in the Online Appendix. In Section I, we investigate the intertemporal relation between various skewness measures and expected market returns. In Section II, we orthogonalize the implied volatility spread measures with respect to the implied variance, realized variance, physical skewness and risk-neutral skewness measures. In Section III, we orthogo...
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Mehra and Prescott (1985) found the difference between average equity and debt returns puzzling because it was too large to be a premium for bearing nondiversifiable aggregate risk. Here, we re-examine this puzzle, taking into account some factors ignored by Mehra and Prescott–taxes, regulatory constraints, and diversification costs–and focusing on long-term rather than short-term savings instr...
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A key part of experiment design is determining how much data to collect. When the data comes in the form of a timeseries, the sample size is expressed both by the count N of the observations and the duration T of the historical period over which observations were made. For forecasting the drift of an asset price process with continuous sample paths, it turns out that the duration is key. I demo...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2003
ISSN: 1556-5068
DOI: 10.2139/ssrn.387380