Working Paper: NBER ID: w1521
Authors: Patric H. Hendershott
Abstract: This paper examines semiannual ex post returns on corporate equities and bonds and six-month Treasury bills over the 1953-84 period with special emphasis on whether returns so far in the 1980s have been usual relative to the previous quarter century. The performance of the equity and bond markets in the 1980s has not been at all unusual, with equity returns being driven by the business cycle and bond returns by unexpected changes in new issue Treasury bond rates. Real six-month Treasury rates have averaged 5½ percentage points,far above the 2 percentage point average since 1953 but about the same as in the 1926-30 period. On an after-tax (roughly 40 percent) basis,however, real bill rate have been in line with the 1950s and 1960s, but significantly above the abnormally low rates in the 1970s.
Keywords: debt returns; equity returns; business cycle; financial markets
JEL Codes: G12; E44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| business cycle turning points (E32) | equity returns (G12) |
| business cycle turning points (E32) | bond returns (G12) |
| business cycle (E32) | equity returns (G12) |
| business cycle (E32) | bond returns (G12) |
| equity returns (G12) | business cycle (E32) |
| bond returns (G12) | business cycle (E32) |