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

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