Wavelet Timescales and Conditional Relationship between Higher-Order Systematic Co-Moments and Portfolio Returns: Evidence in Australian Data
Monash University Econometrics and Business Statistics Working Paper No. WP 16-04
30 Pages Posted: 30 Sep 2004
Date Written: August 2004
Abstract
This paper investigates association between portfolio returns and higher-order systematic co-moments at different timescales obtained through wavelet multi-scaling - a technique that decomposes a given return series into different timescales enabling investigation at different return intervals. For some portfolios, the relative risk positions indicated by systematic co-moments at higher timescales is different from those revealed in raw returns. A strong positive (negative) linear association between beta and co-kurtosis and portfolio return in the up (down) market is observed in raw returns and at different timescales. The beta risk is priced in the up and down markets and the co-kurtosis is not. Co-skewness does not appear to be linearly associated with portfolio returns even after the up and down market split and is not priced.
Keywords: Wavelet multi-scaling, higher-order systematic co-moments, asset pricing
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Asset Pricing When Returns are Nonnormal: Fama-French Factors vs. Higher-Order Systematic Co-Moments
By Y. Peter Chung, Herb Johnson, ...
-
Asset Pricing When Returns are Nonnormal: Fama-French Factors vs. Higher-Order Systematic Co-Moments
By Y. Peter Chung, Herb Johnson, ...
-
Conditional Asset Pricing and Momentum
By Thanh Huynh and Daniel R. Smith
-
Time-Varying Conditional Skewness and the Market Risk Premium
-
CAPM, Higher Co-Moment and Factor Models of UK Stock Returns
By Chi-hsiou Daniel Hung, Mark B. Shackleton, ...
-
How to Price Hedge Funds: From Two- to Four-Moment CAPM
By Angelo Ranaldo and Laurent Favre
-
Homogeneity Hypothesis in the Context of Asset Pricing Models: The Quadratic Market Model
By Giovanni Barone-adesi, Patrick Gagliardini, ...
-
A Three-Moment International Asset-Pricing Model: Theory and Evidence
By Vihang R. Errunza and Oumar Sy