Higher-order co-moments in asset pricing on the stock exchange in Brazil

Abstract

This study seeks to identify the behavior of systemic asymmetry (coskewness) and systemic kurtosis (cokurtosis) in asset pricing on the Brazilian stock exchange (in BM&F Bovespa). The methodology explored by Harvey and Siddique (2000) was used to estimate the degree of coskewness and cokurtosis for stocks in each month t, following the CAPM regression. The three-factor model was used according to Fama and French (1993), with modifications to the calculation of the factors following the methodology exploited by Neves (2003). The results show that for the Brazilian market, assets with negative coskewness and cokurtosis tend to yield more than assets with positive coskewness and cokurtosis. According to observations in the American and London markets, as investors expect higher returns for the high risk, a preference was found for negative coskewness and positive cokurtosis. In Brazil, it was found that in the case of coskewness, it repeats itself, but not for cokurtosis, where the reverse is true, which can lead to the conclusion of a typically risk-averse behavior.

Keywords

• Asset Pricing. Co-Moments
• Coskewness.
• Cokurtosis
• Brazilian Market