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Conference Paper: Expected stock returns and the conditional skewness
Title | Expected stock returns and the conditional skewness |
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Authors | |
Keywords | Equilibrium asset pricing Conditional skewness Return predictability Variance risk premium Third central moments |
Issue Date | 2011 |
Citation | The 2011 China International Conference in Finance, Wuhan, China, 4-7 July 2011. How to Cite? 2011中国金融国际年会, 中国, 武汉, 2011年7月4日至7日. How to Cite? |
Abstract | Motivated by the parsimonious jump-di®usion model of Zhang, Zhao and Chang (2010), we show that the aggregate market returns can be predicted by the conditional skewness of returns and the variance risk premium, a di®erence between the physical and risk-neutral variance of market returns, even though the variance is supposed to be constant only if jump exists. The magnitude of the predictability is particularly striking at the intermediate quarterly return horizon, even combing other predictor variables, like P/D ratio, the default spread and the consumption-wealth ratio (CAY). We also ¯nd that the third central moments are signi¯cant in explaining the variance risk premium, which further implies that the potential link between the variance risk premium and the excess market return is the third central moments, not the skewness. |
Persistent Identifier | http://hdl.handle.net/10722/165807 |
DC Field | Value | Language |
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dc.contributor.author | Chang, EC | en_US |
dc.contributor.author | Zhang, J | en_US |
dc.contributor.author | Zhao, H | en_US |
dc.date.accessioned | 2012-09-20T08:24:02Z | - |
dc.date.available | 2012-09-20T08:24:02Z | - |
dc.date.issued | 2011 | en_US |
dc.identifier.citation | The 2011 China International Conference in Finance, Wuhan, China, 4-7 July 2011. | en_US |
dc.identifier.citation | 2011中国金融国际年会, 中国, 武汉, 2011年7月4日至7日. | - |
dc.identifier.uri | http://hdl.handle.net/10722/165807 | - |
dc.description.abstract | Motivated by the parsimonious jump-di®usion model of Zhang, Zhao and Chang (2010), we show that the aggregate market returns can be predicted by the conditional skewness of returns and the variance risk premium, a di®erence between the physical and risk-neutral variance of market returns, even though the variance is supposed to be constant only if jump exists. The magnitude of the predictability is particularly striking at the intermediate quarterly return horizon, even combing other predictor variables, like P/D ratio, the default spread and the consumption-wealth ratio (CAY). We also ¯nd that the third central moments are signi¯cant in explaining the variance risk premium, which further implies that the potential link between the variance risk premium and the excess market return is the third central moments, not the skewness. | - |
dc.language | eng | en_US |
dc.relation.ispartof | 2011 China International Conference in Finance | en_US |
dc.relation.ispartof | 2011中国金融国际年会 | - |
dc.subject | Equilibrium asset pricing | - |
dc.subject | Conditional skewness | - |
dc.subject | Return predictability | - |
dc.subject | Variance risk premium | - |
dc.subject | Third central moments | - |
dc.title | Expected stock returns and the conditional skewness | en_US |
dc.type | Conference_Paper | en_US |
dc.identifier.email | Chang, EC: ecchang@business.hku.hk | en_US |
dc.identifier.email | Zhang, J: jinzhang@hku.hk | en_US |
dc.identifier.email | Zhao, H: hmzhao@hku.hk | en_US |
dc.identifier.authority | Chang, EC=rp01050 | en_US |
dc.identifier.authority | Zhang, J=rp01125 | en_US |
dc.description.nature | postprint | - |
dc.identifier.hkuros | 207983 | en_US |
dc.description.other | The 2011 China International Conference in Finance, Wuhan, China, 4-7 July 2011. | - |
dc.description.other | 2011中国金融国际年会, 中国, 武汉, 2011年7月4日至7日. | - |