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Higher-Order Systematic Comoments and Asset Pricing: New Evidence


  • Duong Nguyen
  • Tribhuvan N. Puri


We provide evidence supporting Rubinstein's (1973) model that if returns are not normal, measuring risk requires more than just measuring covariance. Higher-order systematic comoments should be important to risk-averse investors who are concerned about the extreme outcomes of their investments. Our paper shows that the Fama-French factors [SMB (return on small stocks less the return on big stocks), HML (return on high book-to-market stocks less the return on low book-to-market stocks)] as well as the momentum and market liquidity factors can be explained by the higher-order systematic comoments, and it lends support to the traditional covariance risk-based theory without having to resort to behavior assumptions. Copyright (c) 2009, The Eastern Finance Association.

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  • Duong Nguyen & Tribhuvan N. Puri, 2009. "Higher-Order Systematic Comoments and Asset Pricing: New Evidence," The Financial Review, Eastern Finance Association, vol. 44(3), pages 345-369, August.
  • Handle: RePEc:bla:finrev:v:44:y:2009:i:3:p:345-369

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    References listed on IDEAS

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    Cited by:

    1. Huber, Jürgen & Kirchler, Michael & Stefan, Matthias, 2014. "Experimental evidence on varying uncertainty and skewness in laboratory double-auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 798-809.
    2. You, Leyuan & Daigler, Robert T., 2010. "Is international diversification really beneficial?," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 163-173, January.
    3. J. Davies & Jonathan Fletcher & Andrew Marshall, 2015. "Testing index-based models in U.K. stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 45(2), pages 337-362, August.

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