Pricing assets with higher moments: Evidence from the Australian and US stock markets

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dc.contributor.authorDoan, P.
dc.contributor.authorLin, C.
dc.contributor.authorZurbrugg, R.
dc.date.issued2010
dc.description.abstractThis paper investigates the importance of higher moments of return distributions in capturing the variation of average stock returns for companies listed in the leading S&P US and Australian indices. We find that Australian stocks are more negatively skewed but less leptokurtic than US stocks. As a result, we find that co-skewness plays a more important role in explaining Australian returns while co-kurtosis is consistently influential for US stock returns. We postulate that the differences in results are related to the underlying firm characteristics of the companies in the two indices, where principally the Australian firms are noticeably smaller than their US counterparts and concentrated in a smaller number industry sectors. This implies that for many smaller exchanges around the world higher moment characteristics displayed by the US market may not be applicable. We also show our results are robust to partly explaining average stock returns in the presence of size, value, and momentum effects. © 2009 Elsevier B.V. All rights reserved.
dc.description.statementofresponsibilityPhuong Doan, Chien-Ting Lin, Ralf Zurbruegg
dc.identifier.citationJournal of International Financial Markets, Institutions and Money, 2010; 20(1):51-67
dc.identifier.doi10.1016/j.intfin.2009.10.002
dc.identifier.issn1042-4431
dc.identifier.orcidZurbrugg, R. [0000-0002-8652-0028]
dc.identifier.urihttp://hdl.handle.net/2440/61743
dc.language.isoen
dc.publisherElsevier BV, North-Holland
dc.rightsCopyright © 2009 Elsevier B.V. All rights reserved.
dc.source.urihttps://doi.org/10.1016/j.intfin.2009.10.002
dc.subjectAsset pricing
dc.subjectCo-skewness
dc.subjectCo-kurtosis
dc.subjectFama and French 3 factors
dc.subjectAustralian stock market
dc.titlePricing assets with higher moments: Evidence from the Australian and US stock markets
dc.typeJournal article
pubs.publication-statusPublished

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