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Article: Empirical evidence on the conditional relation between higher-order systematic co-moments and security returns.
- Article from:
- Quarterly Journal of Business and Economics
- Article date:
- January 1, 2003
- Author:
CopyrightCOPYRIGHT 2003 University of Nebraska-Lincoln. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Introduction
Since the seminal paper by Markowitz (1959), the capital asset pricing model (CAPM) of Sharpe (1964) and Lintner (1965) has become an important tool in finance for assessment of cost of capital, portfolio performance and diversification, valuing investments, and choosing portfolio strategy, among others. The CAPM relates the expected rate of return of an individual security with a measure of its systematic risk. To test the validity of the CAPM, researchers test the security market line given as: E([R.sub.i])=[R.sub.f]+[[beta].sub.im]{E([R.sub.m]-[R.sub.f]} where [R.sub.i], [R.sub.f] and [R.sub.m] are return on risky asset i, risk-free asset, and ...