Pricing the higher order co-moments in the brazilian stock market
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Universidade Federal de Minas Gerais
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Membros da banca
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The aim of this article is to investigate whether assets’ co-skewness and co-kurtosis with the
market are priced on the Brazilian stock market. The Fama-MacBeth (1973) regression
method is used to empirically test the pricing of the higher order co-moments on a crosssection of portfolio returns. The analysis further expands the model by including the size and
value factors proposed by Fama and French (1993) and the momentum factor introduced by
Carhart (1997). The time series results taking into account the the higher co-moments along
with the four-factor variables point out that co-skewness and co-kurtosis capture some
variance in the asset returns beyond the size, value and momentum factors. Moreover, the
cross-sectional estimation results give partial support for co-skewness being priced in the
Brazilian stock market, but only in case the model controls for the size, value and momentum
factors. Moreover, the cross-sectional estimation results give partial support for co-skewness
being priced in the Brazilian stock market. Controlling for up and down markets turns out to
be important and results in strong support for beta pricing while also providing partial
evidence of existing premia for co-skewness and co-kurtosis.
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Higher co-moments, Carhart model, Fama-MacBeth regression, Factors, CAPM, 4-moment CAPM
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https://sbfin.org.br/