Journal ArticleDOI
Conditional Skewness in Asset Pricing Tests
TLDR
In this article, the authors formalize this intuition with an asset pricing model that incorporates conditional skewness and show that the low expected return momentum portfolios have higher skewnness than high expected return portfolios.Abstract:
If asset returns have systematic skewness, expected returns should include rewards for accepting this risk. We formalize this intuition with an asset pricing model that incorporates conditional skewness. Our results show that conditional skewness helps explain the cross-sectional variation of expected returns across assets and is significant even when factors based on size and book-to-market are included. Systematic skewness is economically important and commands a risk premium, on average, of 3.60 percent per year. Our results suggest that the momentum effect is related to systematic skewness. The low expected return momentum portfolios have higher skewness than high expected return portfolios.read more
Citations
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The Cross-Section of Volatility and Expected Returns
TL;DR: In this article, the authors examine the pricing of aggregate volatility risk in the cross-section of stock returns and find that stocks with high sensitivities to innovations in aggregate volatility have low average returns.
Journal ArticleDOI
The Cross-Section of Volatility and Expected Returns
TL;DR: In this paper, the authors examined the pricing of aggregate volatility risk in the cross-section of stock returns and found that stocks with high sensitivities to innovations in aggregate volatility have low average returns.
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Introductory Econometrics for Finance
TL;DR: The third edition has been updated with new data, extensive examples and additional introductory material on mathematics, making the book more accessible to students encountering econometrics for the first time as discussed by the authors.
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Precautionary Saving in the Small and in the Large
TL;DR: The Arrow-Pratt theory of risk aversion was shown to be isomorphic to the theory of optimal choice under risk in this paper, making possible the application of a large body of knowledge about risk aversion to precautionary saving.
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The jump-risk premia implicit in options: evidence from an integrated time-series study $
TL;DR: In this article, the authors examined the joint time series of the S&P 500 index and near-the-money short-dated option prices with an arbitrage-free model, capturing both stochastic volatility and jumps.
References
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Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The Cross‐Section of Expected Stock Returns
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
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Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
Journal ArticleDOI
On Persistence in Mutual Fund Performance
TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Journal ArticleDOI
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.