Business conditions and expected returns on stocks and bonds

Expected returns on common stocks and long-term bonds contain a term or maturity premium that has a clear business-cycle pattern (low near peaks, high near troughs). Expected returns also contain a risk premium that is related to longer-term aspects of business conditions. The variation through time...

Full description

Saved in:
Bibliographic Details
Published inJournal of financial economics Vol. 25; no. 1; pp. 23 - 49
Main Authors Fama, Eugene F., French, Kenneth R.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.11.1989
Elsevier
North-Holland in collaboration with the Graduate School of Management, University of Rochester
Elsevier Sequoia S.A
SeriesJournal of Financial Economics
Subjects
Bonds
Business conditions
Business cycles
Common stock
Expected returns
Long term
Regression analysis
Studies
United States > US
Online AccessGet full text

Cover

More Information
Summary:Expected returns on common stocks and long-term bonds contain a term or maturity premium that has a clear business-cycle pattern (low near peaks, high near troughs). Expected returns also contain a risk premium that is related to longer-term aspects of business conditions. The variation through time in this premium is stronger for low-grade bonds than for high-grade bonds and stronger for stocks than for bonds. The general message is that expected returns are lower when economic conditions are strong and higher when conditions are weak.
ISSN:0304-405X
1879-2774
DOI:10.1016/0304-405X(89)90095-0