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Frequency-Dependent Higher Moment Risks

Author

Listed:
  • Jozef Barunik

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic)

  • Josef Kurka

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic)

Abstract

Based on intraday data for a large cross-section of individual stocks and Exchange traded funds, we show that short-term as well as long-term fluctuations of realized market and average idiosyncratic higher moments risks are priced in the cross-sectionof asset returns. Specifically, we find that market and average idiosyncratic volatility and kurtosis are significantly priced by investors mainly in the long-run even if controlled by market moments and other factors, while skewness is mostly short-run phenomenon. A conditional pricing model capturing the time-variation of moments confirms downward-sloping term structure of skewness risk and upward-sloping term structure of kurtosis risk, moreover the term structures connected to market skewness risk and average idiosyncratic skewness risk exhibit different dymanics.

Suggested Citation

  • Jozef Barunik & Josef Kurka, 2021. "Frequency-Dependent Higher Moment Risks," Working Papers IES 2021/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2021.
    • Handle: RePEc:fau:wpaper:wp2021_11
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6415
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    More about this item

    Keywords

    Higher Moments; frequency; Spectral Analysis; Cross-sectional;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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