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Three‐parameter asset pricing
Author(s) -
Diacogiannis George P.
Publication year - 1994
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090150207
Subject(s) - skewness , portfolio , capital asset pricing model , econometrics , variance (accounting) , expected return , rate of return on a portfolio , mathematics , modern portfolio theory , economics , financial economics , accounting
This paper expands the two‐parameter (that is, mean‐variance) linear model for the behaviour of returns on securities or portfolios into a model that takes into consideration the skewness of return distributions. As in the case of previous two‐parameter relationships, the three‐parameter risk‐return relationship is valid if and only if the reference portfolio is a three‐parameter boundary portfolio.