RT Journal Article
SR Electronic
T1 An Empirical Examination of Ex Ante<br/>Estimates of the Market Risk Premium
JF The Journal of Investing
FD Institutional Investor Journals
SP 51
OP 58
DO 10.3905/joi.2014.23.2.051
VO 23
IS 2
A1 Austin Murphy
A1 Liang Fu
A1 Terry Benzschawel
YR 2014
UL https://pm-research.com/content/23/2/51.abstract
AB This research investigates a new method for estimating the price of risk in the market using information on bond yield spreads. An empirical examination of the model indicates the ex-ante risk premium estimates, which vary significantly over time, have an average one-to-one relationship with future market returns. There is strong evidence that the procedure supplies forecasts that can be very useful in predicting future returns on stocks, high-yield bonds, and the overall market. It may therefore also assist in estimating the required return on assets needed to compute the present value of investments.TOPICS: Fixed income and structured finance, factors, risk premia