Higher Order Systematic Co-Moments and Asset Pricing: New Evidence

Posted: 18 May 2009

See all articles by Duong Nguyen

Duong Nguyen

Florida International University; University of Massachusetts Dartmouth - Charlton College of Business

Tribhuvan Puri

University of Massachusetts Dartmouth - Department of Accounting & Finance

Date Written: May 12, 2009

Abstract

We provide evidence supporting Rubinstein’s (1973) model that if returns are not normal, measuring risk requires more than just measuring covariance. Higher order systematic co-moments should be important to risk-averse investors who are concerned about the extreme outcomes of their investments. Our paper shows that the Fama-French factors (SMB, HML) as well as the momentum and market liquidity factors can be explained by the higher order systematic co-moments, and it lends support to the traditional covariance risk-based theory without having to resort to behavior assumptions.

Keywords: Higher order co-moments, Fama-French, momentum, market liquidity factors

JEL Classification: G12

Suggested Citation

Nguyen, Duong and Puri, Tribhuvan, Higher Order Systematic Co-Moments and Asset Pricing: New Evidence (May 12, 2009). The Financial Review, Vol. 44, No. 3, August 2009, Available at SSRN: https://ssrn.com/abstract=1403508

Duong Nguyen

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

University of Massachusetts Dartmouth - Charlton College of Business ( email )

285 Old Westport Road
North Dartmouth, MA 02747
United States

Tribhuvan Puri (Contact Author)

University of Massachusetts Dartmouth - Department of Accounting & Finance ( email )

285 Old Westport Road
N Dartmouth, MA 02747-2300
United States
508-999-8426 (Phone)

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