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Asset prices and “the devil(s) you know”

Hollstein, F., Nguyen, D. B. B. and Prokopczuk, M. (2019) Asset prices and “the devil(s) you know”. Journal of Banking and Finance, 105. pp. 20-35. ISSN 0378-4266

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To link to this item DOI: 10.1016/j.jbankfin.2019.04.003

Abstract/Summary

In this paper, we study the asset pricing implications of persistence in the risk-neutral return distribution’s central moments. We detect a both economically and statistically significant premium of stocks with low over stocks with high such persistence. Annual value-weighted excess (risk-adjusted) returns are 4.38% (3.06%). These results cannot be explained by factors and characteristics documented in the previous literature. Furthermore, it is not the persistence of only one of the individual distributional moments but rather the joint persistence in all central moments of the risk-neutral distribution that is priced.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:83662
Publisher:Elsevier

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