A growing literature contends that, because returns are not normal, higher-order co-moments 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...

A number of papers (notably Fama and French (1993, 1995)) find that non-market risk factors, such as size and the book-to-market ratio, are priced by investors. We test whether these other risk factors are merely proxies for omitted higher-order market-risk factors. Using size-sorted portfolio...