RISK‐PREMIUM CURVES FOR DIFFERENT CLASSES OF LONG‐TERM SECURITIES, 1950–1966

RISK‐PREMIUM CURVES FOR DIFFERENT CLASSES OF LONG‐TERM SECURITIES, 1950–1966 1963). 3. It should be noted that the concept of risk premium and the approach to its measurement presented in this paper differ from that adopted by some other writers. For example, Lawrence Fisher has defined the r s premium on a bond as the difference between its market yield to maturity ik and the yield on a riskless bond having the same maturity date. Lawrence Fisher, “Determinants of Risk Premiums on Corporate Bonds,” Journal of Political Economy, June, 1959, pp. 217-237. The Journal of Finance tributions are utilized in Section I11 and the annual yields are utilized in Section IV. I n Section I11 our evidence about the shape of risk-premium curves for long-term securities is presented for the entire seventeen-year period and for eight-year and five-year subperiods. This evidence is compared with the normative shape of risk-premium curves as developed by Sharpe! Sharpe also tested his normative theory of the shape of risk-premium curves against evidence based upon mutual fund portfolios. The clear and important difference in Sharpe’s empirical results and those present here are discussed. There is a paucity of theory and evidence about the shape of broad-spectrum risk-premium curves; several reasons for this condition http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

RISK‐PREMIUM CURVES FOR DIFFERENT CLASSES OF LONG‐TERM SECURITIES, 1950–1966

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Publisher
Wiley
Copyright
1969 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1969.tb00364.x
Publisher site
See Article on Publisher Site

Abstract

1963). 3. It should be noted that the concept of risk premium and the approach to its measurement presented in this paper differ from that adopted by some other writers. For example, Lawrence Fisher has defined the r s premium on a bond as the difference between its market yield to maturity ik and the yield on a riskless bond having the same maturity date. Lawrence Fisher, “Determinants of Risk Premiums on Corporate Bonds,” Journal of Political Economy, June, 1959, pp. 217-237. The Journal of Finance tributions are utilized in Section I11 and the annual yields are utilized in Section IV. I n Section I11 our evidence about the shape of risk-premium curves for long-term securities is presented for the entire seventeen-year period and for eight-year and five-year subperiods. This evidence is compared with the normative shape of risk-premium curves as developed by Sharpe! Sharpe also tested his normative theory of the shape of risk-premium curves against evidence based upon mutual fund portfolios. The clear and important difference in Sharpe’s empirical results and those present here are discussed. There is a paucity of theory and evidence about the shape of broad-spectrum risk-premium curves; several reasons for this condition

Journal

The Journal of FinanceWiley

Published: Jun 1, 1969

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