Higher moments and beta asymmetry: evidence from Australia
type="main" xml:id="acfi12022-abs-0001" xml:lang="en"> <title type="main">Abstract</title> <p>We examine whether systematic higher moments capture beta asymmetry in an asset pricing model whereby the conditional beta of a risky asset increases (decreases) during a bear (bull) market state. We first provide a simple conceptual outline from the microeconomic literature to show that beta asymmetry is driven by time-varying higher-order risk preferences (prudence and temperance) across different market states. We then empirically relate these higher-order risk preferences to systematic skewness and systematic kurtosis. We find that beta asymmetry in Australian stock returns cannot be explained by Carhart (1997) 4-factor model but is subsumed by systematic higher moments.
Year of publication: |
2014
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Authors: | Doan, Minh Phuong ; Lin, Chien-Ting ; Chng, Michael ; Gallagher, David |
Published in: |
Accounting and Finance. - Accounting and Finance Association of Australia and New Zealand - AFAANZ, ISSN 0810-5391. - Vol. 54.2014, 3, p. 779-807
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Publisher: |
Accounting and Finance Association of Australia and New Zealand - AFAANZ |
Saved in:
Online Resource
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