Are Higher Co-Moments Priced? A Tale of Two Countries

40 Pages Posted: 13 Nov 2017

See all articles by Keith Lam

Keith Lam

University of Macau

Liang Dong

University of Macau

Hung Wan Kot

University of Macau - Department of Finance and Business Economics

Date Written: November 8, 2017

Abstract

This study investigates the role of higher co-moments in explaining stock returns in the China and UK stock markets. In China, investors price only coskewness risk, while UK investors price both coskewness and cokurtosis risks. China investors use a two-year window period to evaluate coskewness risk, while UK investors utilize a five-year window period to evaluate. In addition, the significant coskewness risk premium in China is driven mainly by the sub-period after the split share structure reform. We argue that differences in market infrastructure and stage of development contribute to explaining the different higher co-moments pricing behavior in the two markets.

Keywords: Higher co-moments; Coskewness; Cokurtosis; China stock market; UK stock market

JEL Classification: G12; G15

Suggested Citation

Lam, Keith and Dong, Liang and Kot, Hung Wan, Are Higher Co-Moments Priced? A Tale of Two Countries (November 8, 2017). Available at SSRN: https://ssrn.com/abstract=3067767 or http://dx.doi.org/10.2139/ssrn.3067767

Keith Lam

University of Macau ( email )

Macau

Liang Dong

University of Macau ( email )

Macau

Hung Wan Kot (Contact Author)

University of Macau - Department of Finance and Business Economics ( email )

Macau

Register to save articles to
your library

Register

Paper statistics

Downloads
22
Abstract Views
259
PlumX Metrics