Hostname: page-component-745bb68f8f-v2bm5 Total loading time: 0 Render date: 2025-01-10T18:08:50.223Z Has data issue: false hasContentIssue false
  • English
  • Français

Arbitrage Equilibrium with Skewed Asset Returns

Published online by Cambridge University Press:  06 April 2009

Giovanni Barone-Adesi
Get access Rights & Permissions [Opens in a new window]

Abstract

The quadratic form of the covariance-co-skewness model by Kraus and Litzenberger and arbitrage pricing theory are used for an empirical investigation of market equilibrium with skewed seecurity returns. Empirical tests similar to the ones in Black-Jensen-Scholes and Gibbons are discussed. The empirical estimates give some support to the Kraus-Litzenberger hypothesis on skewness preference. However, there is some evidence that the tested arbitrage equilibrium is not a complete description of security pricing.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 20 , Issue 3 , September 1985 , pp. 299 - 313
Copyright
Copyright © School of Business Administration, University of Washington 1985

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Black, Fischer; Jensen, Michael; and Scholes, Myron. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, Jensen, M., ed., NY: Praeger (1972).Google Scholar
[2]Conine, Thomas, and Tamarkin, Murray. “On Diversification Given Asymmetry in Returns.” Journal of Finance, Vol. 36 (12 1981), pp. 1143–1155.CrossRefGoogle Scholar
[3]Friend, Irwin, and Westerfield, Randolph. “Co-skewness and Capital Asset Pricing.” Journal of Finance, Vol. 35 (09 1980), pp. 897–919.Google Scholar
[4]Gibbons, Michael. Econometric Methods for Testing a Class of Financial Models. Unpublished Ph.D. Dissertation, University of Chicago (1980).Google Scholar
[5]Kraus, Alan, and Litzenberger, Robert. “Skewness Preference and the Valuation of Risk Assets.” Journal of Finance, Vol. 31 (09 1976), pp. 1085–1100.Google Scholar
[6]Kraus, Alan, and Litzenberger, Robert. “On the Distributional Conditions for a Consumption-Oriented Three Moment CAPM.” Journal of Finance, Vol. 38 (12 1983), pp. 1381–1391.Google Scholar
[7]Miller, Merton, and Scholes, Myron. “Rates of Return in Relation to Risk: A Re-examination of Some Recent Findings.” In Studies in the Theory of Capital Markets, Jensen, M., ed., NY: Praeger (1972)Google Scholar
[8]Roll, Richard. “A Critique of the Asset Pricing Theory's Test, Part 1.” Journal of Financial Economics, Vol. 4 (03 1977), pp. 129–176.CrossRefGoogle Scholar
[9]Roll, Richard, and Ross, Stephen. “An Empirical Investigation of Arbitrage Pricing Theory.” Journal of Finance, Vol. 35 (12 1980), pp. 1073–1103.CrossRefGoogle Scholar
[10]Ross, Stephen. “Return, Risk and Arbitrage.” In Studies in Risk and Return, Friend, I. and Bicksler, B., eds., Cambridge, MA: Ballinger (1975).Google Scholar
[11]Shanken, Jay. “The Arbitrage Pricing Theory: Is it Testable?” Journal of Finance, Vol. 37 (12 1982), pp. 1129–1140.CrossRefGoogle Scholar
[12]Stambaugh, Robert. “On the Exclusion of Assets from Tests of the Two-Parameter Model: A Sensitivity Analysis.” Journal of Financial Economics, Vol. 10 (12 1982), pp. 237–268.CrossRefGoogle Scholar
[13]Zellner, Arnold. “An Efficient Method of Estimating Seemingly Unrelated Regressions.” Journal of the American Statistical Association, Vol. 57 (06 1962), pp. 348–368.CrossRefGoogle Scholar
[14]Rozeff, M.S., and Kinney, W.R.. “Capital Market Seasonality: The Case of Stock Returns.” Journal of Financial Economics, Vol. 3 (12 1976), pp. 379–402.CrossRefGoogle Scholar