A Characterization of the Coskewness-Cokurtosis Pricing Model

9 Pages Posted: 2 Jul 2014

See all articles by Kerry Back

Kerry Back

Rice University - Jesse H. Jones Graduate School of Business

Date Written: July 2, 2014

Abstract

The coskewness-cokurtosis pricing model is equivalent to there not being any return for which the alpha is positive and for which the residual risk has positive coskewness and negative cokurtosis with the market. Such returns would be extremely attractive to investors with mean-variance-skewness-kurtosis preferences who hold the market portfolio. This result establishes a parallel to the CAPM, which is equivalent to the absence of positive alpha returns. It also establishes a parallel to the fundamental theorem of asset pricing, because it relates absence of portfolios with unusually good costs/payoffs to the existence of a stochastic discount factor of a particular type.

Keywords: skewness, kurtosis, coskewness, cokurtosis, CAPM, stochastic discount factor

JEL Classification: G10, G11, G12

Suggested Citation

Back, Kerry, A Characterization of the Coskewness-Cokurtosis Pricing Model (July 2, 2014). Available at SSRN: https://ssrn.com/abstract=2461865 or http://dx.doi.org/10.2139/ssrn.2461865

Kerry Back (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
171
Abstract Views
854
rank
193,165
PlumX Metrics