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A Higher-Moment CAPM of Korean Stock Returns
Journal
International Journal of Trade and Global Markets
ISSN
1742-7541
ISSN-Digital
1742-755X
Type
journal article
Date Issued
2010-01-01
Author(s)
Wölfle, Marco
Abstract (De)
The traditional Capital Asset Pricing Model (CAPM) developed by Sharpe, Lintner and Mossin is based on the strong assumption of normally distributed returns among other restrictions. However, especially in emerging stock markets, returns often deviate from normality, even though the series are of lower frequency. This paper extends upon the traditional framework of the expected equilibrium return of Korean stocks by incorporating higher order moments in order to explain their risk-return characteristics. Empirical evidence shows that a higher-moment CAPM increases the explanatory power of the return generating process. Particularly, in up-market phases, where the return on the market portfolio exceeds the risk-free interest rate, expected return, covariance, co-skewness and co-kurtosis are related.
Language
German
Keywords
co-skewness
co-kurtosis
higher-moment CAPM
return generating process
emerging markets
Korea
market conditions
risk premia
stock returns
capital asset pricing model
stock markets
emerging markets
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Inderscience
Publisher place
Olney
Volume
3
Number
1
Start page
24
End page
51
Pages
28
Subject(s)
Division(s)
Eprints ID
216319