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Co‐Kurtosis and Capital Asset Pricing
Author(s) -
Fang Hsing,
Lai TsongYue
Publication year - 1997
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1997.tb00426.x
Subject(s) - kurtosis , skewness , capital asset pricing model , systematic risk , econometrics , consumption based capital asset pricing model , economics , financial economics , statistics , mathematics
This paper examines the impact of co‐kurtosis on asset pricing using a four‐moment capital asset pricing model. It is shown that, in the presence of skewness and kurtosis in asset return distribution, the expected excess rate of return is related not only to the systematic variance but also to the systematic skewness and systematic kurtosis. Investors are compensated in higher expected return for bearing the systematic variance and the systematic kurtosis risks. Investors also forego the expected excess return for taking the benefit of increasing the systematic skewness.