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Conference Paper: Market excess returns, variance and the third cumulant
Title | Market excess returns, variance and the third cumulant |
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Authors | |
Keywords | Equilibrium asset pricing model Market excess return Variance The third cumulant Variance risk premium |
Issue Date | 2015 |
Publisher | Social Science Research Network. |
Citation | The 2015 Asian Finance Association (AsianFA) Conference, Changsha, Hunan, China, 29 June-2 July 2015. How to Cite? |
Abstract | In this paper, we develop an equilibrium asset pricing model for the market excess return, variance and the third cumulant by using a jump-diffusion process with stochastic variance and jump intensity in Cox, Ingersoll and Ross' (1985) production economy. Empirical evidence with S&P 500 index and options from January 1996 to December 2005 strongly supports our model prediction that lower the third cumulant, higher the market excess returns. Consistent with existing literature, the theoretical mean-variance relation is supported only by regressions on risk-neutral variance. We further demonstrate empirically that the third cumulant explains significantly the variance risk premium. |
Persistent Identifier | http://hdl.handle.net/10722/215628 |
SSRN |
DC Field | Value | Language |
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dc.contributor.author | Chang, EC | - |
dc.contributor.author | Zhang, JE | - |
dc.contributor.author | Zhao, H | - |
dc.date.accessioned | 2015-08-21T13:33:20Z | - |
dc.date.available | 2015-08-21T13:33:20Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | The 2015 Asian Finance Association (AsianFA) Conference, Changsha, Hunan, China, 29 June-2 July 2015. | - |
dc.identifier.uri | http://hdl.handle.net/10722/215628 | - |
dc.description.abstract | In this paper, we develop an equilibrium asset pricing model for the market excess return, variance and the third cumulant by using a jump-diffusion process with stochastic variance and jump intensity in Cox, Ingersoll and Ross' (1985) production economy. Empirical evidence with S&P 500 index and options from January 1996 to December 2005 strongly supports our model prediction that lower the third cumulant, higher the market excess returns. Consistent with existing literature, the theoretical mean-variance relation is supported only by regressions on risk-neutral variance. We further demonstrate empirically that the third cumulant explains significantly the variance risk premium. | - |
dc.language | eng | - |
dc.publisher | Social Science Research Network. | - |
dc.relation.ispartof | Asian Finance Association (AsianFA) Conference 2015 | - |
dc.subject | Equilibrium asset pricing model | - |
dc.subject | Market excess return | - |
dc.subject | Variance | - |
dc.subject | The third cumulant | - |
dc.subject | Variance risk premium | - |
dc.title | Market excess returns, variance and the third cumulant | - |
dc.type | Conference_Paper | - |
dc.identifier.email | Chang, EC: ecchang@hku.hk | - |
dc.identifier.authority | Chang, EC=rp01050 | - |
dc.description.nature | published_or_final_version | - |
dc.identifier.doi | 10.2139/ssrn.2564088 | - |
dc.identifier.hkuros | 249974 | - |
dc.identifier.spage | 1 | - |
dc.identifier.epage | 39 | - |
dc.identifier.eissn | 1556-5068 | - |
dc.publisher.place | United States | - |
dc.identifier.ssrn | 2564088 | - |
dc.identifier.issnl | 1556-5068 | - |