Fama, Eugene F. and Kenneth R. French, "Common Risk Factors in the Returns on Stocks and Bonds", Journal of Financial Economics, Vol. 33, No. 1, (February 1993), pp. 3-56.

Abstract: This paper identifies five common risk factors in the returns on stocks and bonds. There are three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity. There are two bond-market factors, related to maturity and default risks. Stock returns have shared variation due to the stock-market factors, and they are linked to bond returns through shared variation in the bond-market factors. Except for low-grade corporates, the bond-market factors capture the common variation in bond returns. Most important, the five factors seem to explain average returns on stocks and bonds.

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