Higher-Order Moments of Fundamentals: A Literature Review
35 Pages Posted: 28 Mar 2017 Last revised: 19 Aug 2017
Date Written: March 25, 2017
This literature review outlines the major progress in the research of the fundamental higher-order moments. We survey the existence, the formation, and the financial market and macroeconomics implications for the moments. Research shows that the time-varying volatility and the non-Gaussian shocks widely exist in all measures of fundamentals at both micro and macro levels. Additionally, the granular network among firms is the origin of the fundamental higher-order moments. Empirical evidence shows that the moments have strong predictive power on asset prices and macroeconomic variables. We also highlight crucial areas where more research is still needed to better understand the moments.
Keywords: Fundamental Higher-Order Moments, Granular Hypothesis, Network Origin
JEL Classification: G12
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