Pricing Skewness and Kurtosis Risk on the Swedish Stock Market
(2005)Department of Economics
- Abstract
- This paper investigates the role of higher moments on the Swedish stock market 1979-2004 using the asset pricing framework developed in Fang & Lai (1997). The models are estimated using a two-step ordinary least squares procedure and, in addition, an instrumental variables approach to account for the potential problem of errors in variables. Estimations have been made on the full period and in two sub-periods. The results show that the asset pricing performance improves when augmenting the standard capital asset pricing model with third (skewness) and fourth (kurtosis) moments. Further, we find that both skewness and kurtosis risk carries statistically significant risk premiums. Our results are in line with the results of Fang & Lai (1997)... (More)
- This paper investigates the role of higher moments on the Swedish stock market 1979-2004 using the asset pricing framework developed in Fang & Lai (1997). The models are estimated using a two-step ordinary least squares procedure and, in addition, an instrumental variables approach to account for the potential problem of errors in variables. Estimations have been made on the full period and in two sub-periods. The results show that the asset pricing performance improves when augmenting the standard capital asset pricing model with third (skewness) and fourth (kurtosis) moments. Further, we find that both skewness and kurtosis risk carries statistically significant risk premiums. Our results are in line with the results of Fang & Lai (1997) and other surveys covering the similiar area, like Kraus & Litzenberger (1976). The results presented in this survey can further be used by investors on the Swedish stock market, to make asset management even more effective by take into account the effect of skewness and kurtosis in asset return distribution. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1334394
- author
- Johansson, Andreas
- supervisor
- organization
- year
- 2005
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- mean-variance, Skewness, Kurtosis, CAPM, moments, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- English
- id
- 1334394
- date added to LUP
- 2005-09-14 00:00:00
- date last changed
- 2010-08-03 10:53:12
@misc{1334394,
abstract = {{This paper investigates the role of higher moments on the Swedish stock market 1979-2004 using the asset pricing framework developed in Fang & Lai (1997). The models are estimated using a two-step ordinary least squares procedure and, in addition, an instrumental variables approach to account for the potential problem of errors in variables. Estimations have been made on the full period and in two sub-periods. The results show that the asset pricing performance improves when augmenting the standard capital asset pricing model with third (skewness) and fourth (kurtosis) moments. Further, we find that both skewness and kurtosis risk carries statistically significant risk premiums. Our results are in line with the results of Fang & Lai (1997) and other surveys covering the similiar area, like Kraus & Litzenberger (1976). The results presented in this survey can further be used by investors on the Swedish stock market, to make asset management even more effective by take into account the effect of skewness and kurtosis in asset return distribution.}},
author = {{Johansson, Andreas}},
language = {{eng}},
note = {{Student Paper}},
title = {{Pricing Skewness and Kurtosis Risk on the Swedish Stock Market}},
year = {{2005}},
}