Please use this identifier to cite or link to this item: https://hdl.handle.net/2440/61743
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Type: Journal article
Title: Pricing assets with higher moments: Evidence from the Australian and US stock markets
Author: Doan, P.
Lin, C.
Zurbrugg, R.
Citation: Journal of International Financial Markets, Institutions and Money, 2010; 20(1):51-67
Publisher: Elsevier BV, North-Holland
Issue Date: 2010
ISSN: 1042-4431
Statement of
Responsibility: 
Phuong Doan, Chien-Ting Lin, Ralf Zurbruegg
Abstract: This paper investigates the importance of higher moments of return distributions in capturing the variation of average stock returns for companies listed in the leading S&P US and Australian indices. We find that Australian stocks are more negatively skewed but less leptokurtic than US stocks. As a result, we find that co-skewness plays a more important role in explaining Australian returns while co-kurtosis is consistently influential for US stock returns. We postulate that the differences in results are related to the underlying firm characteristics of the companies in the two indices, where principally the Australian firms are noticeably smaller than their US counterparts and concentrated in a smaller number industry sectors. This implies that for many smaller exchanges around the world higher moment characteristics displayed by the US market may not be applicable. We also show our results are robust to partly explaining average stock returns in the presence of size, value, and momentum effects. © 2009 Elsevier B.V. All rights reserved.
Keywords: Asset pricing
Co-skewness
Co-kurtosis
Fama and French 3 factors
Australian stock market
Rights: Copyright © 2009 Elsevier B.V. All rights reserved.
DOI: 10.1016/j.intfin.2009.10.002
Published version: http://dx.doi.org/10.1016/j.intfin.2009.10.002
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