Modelling Emerging Market Risk Premia Using Higher Moments
AbstractThe purpose of this paper is to assess the incremental value of higher moments in modelling capital asset pricing models (CAPMs) of emerging markets. Whilst it is recognized that emerging markets are unlikely to yield sensible results in a mean-variance world, the high skewness and kurtosis present in emerging markets returns make our assessment potentially interesting. Generalized method of moments (GMM) is used for the estimation. We also present new versions of higher-moment market models of the data-generating process of the individual emerging markets and use these to identify model parameters. We find some evidence that emerging markets are better explained with additional systematic risks, such as co-skewness and co-kurtosis, than the conventional mean-variance CAPM. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 4 (1999)
Issue (Month): 4 (October)
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Stephen Satchell & Soosung Hwang, 1999. "Modelling Emerging Market Risk Premia Using Higher Moments," Working Papers wp99-17, Warwick Business School, Financial Econometrics Research Centre.
- Hwang, S. & Satchell, S. E., 1998. "Modelling Emerging Market Risk Premia using Higher Moments," Cambridge Working Papers in Economics 9806, Faculty of Economics, University of Cambridge.
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