17 Pages Posted: 17 May 2013 Last revised: 1 Feb 2017
Date Written: November 1, 2016
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
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