A Three-Moment International Asset-Pricing Model: Theory and Evidence

Errunza, Vihang R.; Sy, Oumar

doi:10.2139/ssrn.845770

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A Three-Moment International Asset-Pricing Model: Theory and Evidence

46 Pages Posted: 14 Nov 2005

See all articles by Vihang R. Errunza

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Oumar Sy

Dalhousie University

Date Written: November 2005

Abstract

We develop a three-moment international asset-pricing model (TM-IAPM) that prices coskewness and embeds the standard IAPMs as special cases. We use the model to investigate the time-series behavior of market, size, value, and momentum premiums in the United States, Japan, and the United Kingdom equity markets. We find that the model explains most of the variation of these premiums during the 1980s and 1990s and that the coskewness risk is more important than covariance risk.

Keywords: International asset pricing, nonlinearity, anomaly, size, value, momentum

JEL Classification: G10, G12, G14, G15

Suggested Citation: Suggested Citation

Errunza, Vihang R. and Sy, Oumar, A Three-Moment International Asset-Pricing Model: Theory and Evidence (November 2005). Available at SSRN: https://ssrn.com/abstract=845770 or http://dx.doi.org/10.2139/ssrn.845770