Low Risk Anomalies?

111 Pages Posted: 13 Apr 2015 Last revised: 18 Sep 2019

See all articles by Paul Schneider

Paul Schneider

University of Lugano - Institute of Finance; Swiss Finance Institute

Christian Wagner

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

Josef Zechner

Vienna University of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 17, 2019

Abstract

This paper shows that low risk anomalies in the CAPM and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual coskewness, which allows us to construct coskewness factor mimicking portfolios. Controlling for skewness renders the alphas of betting-against-beta and -volatility insignificant. We also show that the returns of beta- and volatility-sorted portfolios are largely driven by a single principal component, which is in turn largely explained by skewness.

Keywords: low risk anomaly, coskewness, skewness, risk premia, equity options

JEL Classification: G12

Suggested Citation

Schneider, Paul Georg and Wagner, Christian and Zechner, Josef, Low Risk Anomalies? (September 17, 2019). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2593519 or http://dx.doi.org/10.2139/ssrn.2593519

Paul Georg Schneider

University of Lugano - Institute of Finance ( email )

Via Buffi 13
CH-6900 Lugano
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Christian Wagner (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

Register to save articles to
your library

Register

Paper statistics

Downloads
2,349
Abstract Views
10,337
rank
3,828
PlumX Metrics