Higher Co-Moment CAPM and Hedge Fund Returns

Johan Knif, Dimitrios Koutmos and Gregory Koutmos ()
Additional contact information
Johan Knif: School of Economics
Dimitrios Koutmos: 100 Institute Road
Gregory Koutmos: Fairfield University

Atlantic Economic Journal, 2020, vol. 48, issue 1, No 9, 99-113

Abstract: Abstract This paper uses a higher moment capital asset pricing model to characterize the returns of several types of hedge fund indices. The quantile regression approach is used to test for any possible changes in the coefficients of the model. The hypothesis that the parameters are stable across the distribution of returns is tested and rejected. The most stable coefficient is the second moment (beta) coefficient. The higher moment coefficients vary considerably. Alpha returns tend to be positive and significant at the center of the distribution. The importance of higher co-moments (i.e., co-skewness and co-kurtosis) is more prevalent at the tails of the distribution of returns suggesting that there are significant tail risks. These findings could potentially have important implications for portfolio strategies and performance evaluation.

Keywords: Hedge funds; Co-skewness; Co-kurtosis; CAPM; Quantile regression (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11293-020-09659-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:48:y:2020:i:1:d:10.1007_s11293-020-09659-1

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11293/PS2

DOI: 10.1007/s11293-020-09659-1

Access Statistics for this article

Atlantic Economic Journal is currently edited by Kathleen S. Virgo

More articles in Atlantic Economic Journal from Springer, International Atlantic Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().