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Asset pricing with partial-moments

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  • Anthonisz, Sean A.

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.

Suggested Citation

  • Anthonisz, Sean A., 2012. "Asset pricing with partial-moments," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2122-2135.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:7:p:2122-2135
    DOI: 10.1016/j.jbankfin.2012.03.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Partial-moment; Nonlinear pricing kernel; Option coskewness;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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