Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

In the paper "Economic Forces and the Stock Market" by Chen, Roll and Ross, unanticipated risk premium (URP) is tested as a potential risk factor for stock returns. This factor is commonly calculated as the difference between the return on a low-grade bond index and the return on a portfolio of long-term government bonds.

However, in this paper, there is no mention as to what type of return is used to compute URP. Any guess as to whether it would be Month-to-date total return, Yield to maturity, ...?

share|improve this question
This is really too basic so I'm gonna close this. The answer is it depends, how you compute your risk-premium, which is actually often referred as spread. You can look at this post where I discuss some of the spread measures. – SRKX Sep 13 '13 at 15:13
The post is absolutely not related to my question. My question is also not basic at all, since there is a confusion as to the inputs of unanticipated risk premium (yield, vs. total return vs. price return). I am fully aware of what unanticipated risk premium is, but the computation differs in literature. – Mayou Sep 13 '13 at 15:28
I misunderstand it then, I'll let the community answer it then. Feel free to add background to your questions to make sure if there is usual confusion in a topic as you say. – SRKX Sep 13 '13 at 15:38
I made some edits. Thanks! – Mayou Sep 13 '13 at 15:42

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.