Moment Risk Premia and the Cross-Section of Stock Returns

41 Pages Posted: 29 Sep 2016 Last revised: 30 Mar 2018

See all articles by Richard D. F. Harris

Richard D. F. Harris

University of Bristol, School of Accounting and Finance; affiliation not provided to SSRN

Fang Qiao

University of International Business and Economics (UIBE) - School of Banking and Finance

Date Written: March 26, 2018

Abstract

We investigate the determinants of moment risk premia (MRP) and their relationship with stock returns. Stocks with high beta, idiosyncratic volatility and maximum return are associated with a high variance risk premium (VRP). The skew risk premium (SRP) is mainly driven by return reversals, the maximum return and idiosyncratic skewness, while the kurtosis risk premium (KRP) is associated with all firm characteristics. We find that both the VRP and SRP are negatively related to stock returns, while the KRP has no relation with stock returns. However, the negative relation between the SRP and stock returns is robust to the inclusion of firm-level variables, while the VRP is not.

Keywords: the variance, skew and kurtosis risk premia, the cross section of stock return

JEL Classification: G12

Suggested Citation

Harris, Richard D. F. and Qiao, Fang, Moment Risk Premia and the Cross-Section of Stock Returns (March 26, 2018). Available at SSRN: https://ssrn.com/abstract=2845138 or http://dx.doi.org/10.2139/ssrn.2845138

Richard D. F. Harris

University of Bristol, School of Accounting and Finance ( email )

United Kingdom

HOME PAGE: http://www.bristol.ac.uk/people/person/Richard-Harris-50ffa5fb-0e86-4458-8e8c-8dace6eb3435/

affiliation not provided to SSRN

Fang Qiao (Contact Author)

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

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