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Asset pricing with partial-moments

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  • Anthonisz, Sean A.
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    Abstract

    I bridge the current pricing kernel framework with the early partial-moment pricing models of the beta framework, thereby reconciling and clarifying these bodies of literature. I argue for the inclusion of powers of min and max functions within a generalized kernel, and form a generalized beta model. Polynomial kernels and the kernel underpinning the partial-moment analogue of the Sharpe-Lintner CAPM are nested. I derive the partial-moment analogue to the Black CAPM, thus completing a theoretical parallelism, and compare the kernel-implied and canonical risk-neutral probabilities. A new model involving both lower and upper partial-moments, accommodating various kernel shapes present in the literature, is developed in the context of preference regularity conditions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 7 ()
    Pages: 2122-2135

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:7:p:2122-2135

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Partial-moment; Nonlinear pricing kernel; Option coskewness;

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