Expected Equity Returns Research Articles

New Information and Australian Equity Returns: A Multivariate Analysis

Utilising multivariate techniques the study investigates the relationship between new macroeconomic information and weekly Australian equity returns and tests the joint hypothesis of market efficiency and constant equilibrium expected equity returns (or constant risk premium). The joint hypothesis is strongly rejected for the 1978–1981 sample period. On the other hand, Australian equity returns are found to be significantly positively related to U.S. equity returns, growth of the monetary base, and the rate of change of the US$/A$ exchange rate.

The Expected Return to Equity and International Asset Prices

This paper is concerned with empirical measurement, analysis, and comparison of the returns expected by investors in U. S., German, French and Japanese equity markets. The expedited return to equity is a pivotal concept in capital market theory because of the concern of this theory with analyzing relationships between expected returns to the general market and expected returns to individual securities. Because the expected equity returns are not directly observable, the approach almost uniformly taken in the empirical testing of capital market theory is to make additional behavioral assumptions beyond those contained in the basic theory that enable it to be translated into an analysis of market relationships among ex-post returns. Empirical tests then become tests of both the basic theory and the appended assumptions. A new approach to the empirical testing of capital market relationships is to develop empirical approximations to the returns expected in the equity market, and to employ these expectational measures to directly test capital market relationships. This paper formulates and examines this approach. Empirical approximations of the expected equity return for a representative group of major international stock exchanges are formulated, estimated, and analyzed, leading to a direct test of the International Asset Pricing model in its original form.