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http://ssrn.com/abstract=214169
 
 

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An Analysis of Risk and Pricing Anomalies


Tobias J. Moskowitz


University of Chicago - Booth School of Business

September 1999

CRSP Working Paper No. 500

Abstract:     
This paper examines the link between several well-known asset pricing anomalies and covariance risk. Estimating the time-series of the covariance matrix of asset returns via a multivariate GARCH model, I quantify the contribution made by each anomaly to the covariance matrix of asset returns, as well as its ability to forecast future covariances. I find that anomalous returns associated with firm size are closely linked to the covariance matrix, while those associated with book-to-market equity are weakly linked. However, returns associated with momentum do not appear related to covariance risk and do not forecast future covariances. Finally, despite its lack of predictive power on the cross-section of expected returns, the market portfolio is the single most important factor contributing to and forecasting covariance risk.

Number of Pages in PDF File: 40

JEL Classification: G12

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Date posted: March 15, 2000  

Suggested Citation

Moskowitz, Tobias J., An Analysis of Risk and Pricing Anomalies (September 1999). CRSP Working Paper No. 500. Available at SSRN: http://ssrn.com/abstract=214169 or http://dx.doi.org/10.2139/ssrn.214169

Contact Information

Tobias J. Moskowitz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)
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