An intertemporal CAPM with higher-order moments

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We propose an intertemporal asset pricing model that incorporates both preference for higher-order moments and stochastic investment opportunities and encompasses a wide range of existing models. We provide supporting evidence from the U.S. stock market and find that, not only is systematic skewness negatively priced, an extra return premium is also required for accepting high systematic risk associated with a rise in risk aversion. Our findings suggest that considering both skewness preference and intertemporal hedging demands improves the estimated risk-return trade-off, and that cross-sectional anomalies such as value, momentum, and failure probability puzzles can be partially explained by our model.
Publisher
ELSEVIER SCIENCE INC
Issue Date
2017-11
Language
English
Article Type
Article
Keywords

EXPECTED STOCK RETURNS; PORTFOLIO SELECTION; PRICING KERNELS; ASSET RETURNS; CROSS-SECTION; RISK-FACTORS; SKEWNESS; MARKET; PREFERENCE; EQUILIBRIUM

Citation

NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE, v.42, pp.314 - 337

ISSN
1062-9408
DOI
10.1016/j.najef.2017.07.017
URI
http://hdl.handle.net/10203/237178
Appears in Collection
MT-Journal Papers(저널논문)
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