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A New Test of the Three-Moment Capital Asset Pricing Model

Published online by Cambridge University Press:  06 April 2009

Kian-Guan Lim
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Abstract

This paper tests the Kraus-Litzenberger (1976) three-moment capital asset pricing model using Hansen's (1982) generalized method-of-moments (GMM). The GMM approach does not impose strong distributional assumptions on the asset returns. This is an interesting issue since there is no obvious multivariate distribution for returns that also exhibits co-skewness. Using monthly stock returns to test the model, there is some evidence that systematic skewness is priced.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 24 , Issue 2 , June 1989 , pp. 205 - 216
Copyright
Copyright © School of Business Administration, University of Washington 1989

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