Debt and Equity Yields: 1926-80

75 Pages Posted: 11 Apr 2004 Last revised: 17 Aug 2010

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Roger D. Huang

University of Notre Dame

Date Written: June 1983


The study is divided into four broad parts, beginning with an exploratory analysis of the data on expost returns on corporate equities and bonds for the 1926-80 period. In Part 2, we estimate the relationships between one-month expost returns on corporate bonds and equities andvariations in Treasury bill rates, economic activity, and other variables.The major other variable is unanticipated changes in new issue coupon rates on long-term Treasury bonds. Parts 3 and 4 contain econometric investigations of the determinants of one-month Treasury bill rates and unanticipated changes in long-term Treasury coupon rates, respectively. These parts extend the analysis of Part 2 by explaining variables that determine expost corporate bond and equity returns and provide evidence on the determination of new-issue yields on short- and long-term default-free debt. The last three parts ofthe study report econometric results based on data from the 1953-83 period.A number of important issues are addressed in the econometric parts of the paper. These include: the validity of the Modigliani-Cohn valuation-error hypothesis, the measurement of Merton's "excess return on the market", the relationship between real new-issue debt rates and real economic activity, and the usefulness of the Livingston survey data in explaining financial returns.

Suggested Citation

Hendershott, Patric H. and Huang, Roger D., Debt and Equity Yields: 1926-80 (June 1983). NBER Working Paper No. w1142, Available at SSRN:

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Roger D. Huang

University of Notre Dame ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6370 (Phone)

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