212 Simon Hall
1 Olympian Way
John M. Olin Business School
Washington University in St. Louis
St. Louis MO 63130
NBER Working Papers and Publications
|August 2009||The stock market and aggregate employment|
with Lu Zhang: w15219
We study the interactions between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth. Consistent with this logic, we document that long-horizon payroll growth and change in unemployment rate are predictable with risk premium proxies. Lagged payroll growth and change in unemployment rate also forecast stock market excess returns.
Published: Do time-varying risk premiums explain labor market performance? (with Chen), 2011, Journal of Financial Economics 99 (2), 385-399.
|July 2007||Neoclassical Factors|
with Lu Zhang: w13282
Building on neoclassical reasoning, we propose a new multi-factor model that consists of the market factor and factor mimicking portfolios based on investment and productivity. The neo- classical three-factor model outperforms traditional factor models in explaining the average returns across testing portfolios formed on momentum, financial distress, investment, profitability, accruals, net stock issues, earnings surprises, and asset growth. Most intriguingly, winners have higher loadings than losers on both the low-minus-high investment factor and the high- minus-low productivity factor, which in turn help explain momentum profits.
|May 2006||The Expected Value Premium|
with Ralitsa Petkova, Lu Zhang: w12183
Fama and French (2002) estimate the equity premium using dividend growth rates to measure the expected rate of capital gain. We use similar methods to study the value premium. From 1941 to 2002, the expected HML return is on average 5.1% per annum, consisting of an expected-dividend-growth component of 3.5% and an expected-dividend-to-price component of 1.6%. The ex-ante HML return is also countercyclical: a positive, one-standard-deviation shock to real consumption growth rate lowers this premium by about 0.45%. Unlike the equity premium, there is only mixed evidence suggesting that the value premium has declined over time.
Published: Chen, Long & Petkova, Ralitsa & Zhang, Lu, 2008. "The expected value premium," Journal of Financial Economics, Elsevier, vol. 87(2), pages 269-280, February. citation courtesy of
|May 2005||Expected Returns, Yield Spreads, and Asset Pricing Tests|
with Murillo Campello, Lu Zhang: w11323
We use yield spreads to construct ex-ante returns on corporate securities, and then use the 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 profits.
- Murillo Campello & Long Chen & Lu Zhang, 2008. "Expected returns, yield spreads, and asset pricing tests," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(3), pages 1297-1338, May. citation courtesy of
- Lu Zhang & Murillo Campello & Long Chen, 2005. "Expected returns, yield spreads, and asset pricing tests," Proceedings, Board of Governors of the Federal Reserve System (U.S.). citation courtesy of