Low Risk Anomalies?

Paul Schneider, Christian Wagner and Josef Zechner
Additional contact information
Paul Schneider: University of Lugano - Institute of Finance; Swiss Finance Institute
Christian Wagner: WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

No 19-50, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper shows that low risk anomalies in the CAPM and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual coskewness, which allows us to construct coskewness factor mimicking portfolios. Controlling for skewness renders the alphas of betting-against-beta and -volatility insignificant. We also show that the returns of beta- and volatility-sorted portfolios are largely driven by a single principal component, which is in turn largely explained by skewness.

Keywords: low risk anomaly; coskewness; skewness; risk premia; equity options (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 111 pages
Date: 2019-09
New Economics Papers: this item is included in nep-fmk and nep-ore
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Low‐Risk Anomalies? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1950

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