Frequency-Dependent Higher Moment Risks

Jozef Baruník and Josef Kurka

No 2021/11, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Based on intraday data for a large cross-section of individual stocks and Exchange traded funds, we show that short-term as well as long-term fluctuations of realized market and average idiosyncratic higher moments risks are priced in the cross-sectionof asset returns. Specifically, we find that market and average idiosyncratic volatility and kurtosis are significantly priced by investors mainly in the long-run even if controlled by market moments and other factors, while skewness is mostly short-run phenomenon. A conditional pricing model capturing the time-variation of moments confirms downward-sloping term structure of skewness risk and upward-sloping term structure of kurtosis risk, moreover the term structures connected to market skewness risk and average idiosyncratic skewness risk exhibit different dymanics.

Keywords: Higher Moments; frequency; Spectral Analysis; Cross-sectional (search for similar items in EconPapers)
JEL-codes: C14 C22 G11 G12 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-04, Revised 2021-04
New Economics Papers: this item is included in nep-cwa, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2021_11

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