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Higher‐order moments and asset pricing in the Australian stock market

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  • Richard Mawulawoe Ahadzie
  • Nagaratnam Jeyasreedharan

Abstract

This paper investigates a set of realised higher‐order co‐moment risk–return relationships in the Australian stock market. We test the predictive power of the asset pricing model by implementing the two‐, three‐, four‐moment Capital Asset Pricing Model. Our findings show that investors respond differently to information related to realised higher‐order co‐moments, and that the corresponding gamma (normalised co‐skewness) and kappa (normalised co‐kurtosis) risk factors remain priced in the presence of continuous beta and jump beta. Furthermore, we find that the realised high‐order co‐moment risk measures are priced differently and remain significant even when combined with a set of firm characteristics.

Suggested Citation

  • Richard Mawulawoe Ahadzie & Nagaratnam Jeyasreedharan, 2024. "Higher‐order moments and asset pricing in the Australian stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 75-128, March.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:1:p:75-128
    DOI: 10.1111/acfi.13135
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