Higher Co-Moments and Downside Beta in Asset Pricing

IF 0.7 Q4 BUSINESS, FINANCE

Asian Academy of Management Journal of Accounting and Finance Pub Date : 2019-08-31 DOI:10.21315/aamjaf2019.15.1.6

Imran Umer Chhapra, Muhammad Kashif

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引用次数: 4

Abstract

The Capital Asset Pricing Model (CAPM) assumes a linear relationship between an assetAs return and financial market. However, empirical invalidity of linearity of returns has given birth to other CAPM models. Therefore, this study aims to examine the implication of preference by a risk-averse investor for higher moments and downside risk as investors are assumed to be prudent, temperate and cautious and prefer firms with negative co-skewness, positive co-kurtosis, and downside risk as they yield higher risk premium. To empirically test these theoretical assumptions data of all 901 firms (listed and delisted) in Pakistan Stock Exchange (PSX) from 2000 to 2016 have been used. Decile portfolios are constructed for cross-sectional and time series analysis. Generalized Method of Moments (GMM) and Wald Test are applied to check the robustness of results. The results indicate that co-skewness, co-kurtosis and downside beta are important risk factors but only downside beta is genuinely priced over and above what co-variance risk can explain and CAPM does not significantly capture market risk premium indicating the existence of other risk measures in PSX. The findings can help investors in formulating investment strategies for constructing well-diversified and efficient portfolios and can enable firm managers to take appropriate capital budgeting decisions by appropriately costing equities.

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资产定价的高共同时刻和下行贝塔系数

资本资产定价模型（CAPM）假设资产回报率与金融市场之间存在线性关系。然而，收益线性的经验无效性催生了其他CAPM模型。因此，本研究旨在检验风险厌恶型投资者对更高时刻和下行风险的偏好的含义，因为投资者被认为是谨慎、温和和谨慎的，并且更喜欢具有负共偏、正共峰度和下行风险，因为它们产生了更高的风险溢价。为了实证检验这些理论假设，使用了2000年至2016年巴基斯坦证券交易所（PSX）所有901家公司（上市和退市）的数据。Decile投资组合是为横截面和时间序列分析而构建的。应用广义矩量法（GMM）和Wald检验检验结果的稳健性。结果表明，共偏度、共峰度和下行β是重要的风险因素，但只有下行β的价格真正超过了协差风险所能解释的价格，CAPM没有显著捕捉市场风险溢价，这表明PSX中存在其他风险度量。研究结果可以帮助投资者制定投资策略，构建多元化和高效的投资组合，并使公司经理能够通过适当的股票成本来做出适当的资本预算决策。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Asian Academy of Management Journal of Accounting and Finance BUSINESS, FINANCE-

CiteScore

1.50

自引率

0.00%

发文量

审稿时长

20 weeks

期刊介绍： To provide a forum for the exchange of ideas and dissemination of empirical findings and analytical research in the specialized areas of accounting and finance with special emphasis on scholarly works with policy implications for countries in the Asia Pacific. The following are some of the topical subject areas relevant to the journal (but are not limited to): Accounting • Financial reporting and accounting standards • Auditing issues • Value based accounting and its relevance • Theory of accounting firm • Environmental auditing • Corporate governance issues • Public sector accounting Finance • Valuation of financial assets • International capital flows • Ownership and agency theory • Stock market behavior • Investment and portfolio management • Islamic banking and finance • Microstructures of financial markets