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Idiosyncratic Kurtosis and Expected Returns

17 Pages Posted: 17 May 2013 Last revised: 1 Feb 2017

Benjamin M. Blau

Utah State University - Huntsman School of Business

Ryan J. Whitby

Utah State University - Huntsman School of Business

Date Written: November 1, 2016

Abstract

This study tests whether or not investors are compensated for holding stocks with excess kurtosis. Contrary to the risk-based idea, we find a significant negative return premium associated with idiosyncratic kurtosis. These results hold in a number of Fama-MacBeth (1973) regressions that include various controls. The notion that kurtosis is negatively associated with expected returns is consistent with a growing body of research that reports negative returns when examining the relation between expected returns and other measures of risk.

Keywords: Kurtosis, Leptokurtic Risk

Suggested Citation

Blau, Benjamin M. and Whitby, Ryan J., Idiosyncratic Kurtosis and Expected Returns (November 1, 2016). Available at SSRN: https://ssrn.com/abstract=2266042 or http://dx.doi.org/10.2139/ssrn.2266042

Benjamin M. Blau (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

Ryan J. Whitby

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435.797.9495 (Phone)

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