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

Kian-Guan Lim

Journal of Financial and Quantitative Analysis, 1989, vol. 24, issue 2, 205-216

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.

Date: 1989
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