Asset Pricing When Returns Are Nonnormal: Fama-French Factors versus Higher-Order Systematic Comoments
A growing literature contends that, since returns are not normal, higher-order comoments matter to risk-averse investors. Fama and French (1993, 1995) find that nonmarket risk factors based on size and book-to-market ratio are priced by investors. We test the hypothesis that the Fama-French factors simply proxy for the pricing of higher-order comoments. Using portfolio returns over various time horizons, we show that adding a set of systematic comoments (but not standard moments) of order 3–10 reduces the explanatory power of the Fama-French factors to insignificance in almost every case.
Year of publication: |
2006
|
---|---|
Authors: | Chung, Y. Peter ; Schill, Michael J. |
Published in: |
The Journal of Business. - University of Chicago Press. - Vol. 79.2006, 2, p. 923-940
|
Publisher: |
University of Chicago Press |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Chung, Y. Peter, (2006)
-
Chung, Y. Peter, (2002)
-
Chung, Y. Peter, (2004)
- More ...