Fractional-moment Capital Asset Pricing model

Hui Li, Min Wu and Xiao-Tian Wang

Chaos, Solitons & Fractals, 2009, vol. 42, issue 1, 412-421

Abstract: In this paper, we introduce the definition of the “α-covariance” and present the fractional-moment versions of Capital Asset Pricing Model,which can be used to price assets when asset return distributions are likely to be stable Levy (or Student-t) distribution during panics and stampedes in worldwide security markets in 2008. Furthermore, if asset returns are truly governed by the infinite-variance stable Levy distributions, life is fundamentally riskier than in a purely Gaussian world. Sudden price movements like the worldwide security market crash in 2008 turn into real-world possibilities.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:42:y:2009:i:1:p:412-421

DOI: 10.1016/j.chaos.2009.01.003

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