This article investigates whether volatility, skewness, and kurtosis risks are priced in the European stock market and assess the signs and the magnitudes of the corresponding risk premia. To this end, we adopt two approaches: a model-free approach based on swap contracts, and a model-based approach built on portfolio-sorting techniques. A number of results are obtained. First, stocks with high exposure to innovations in implied market volatility (skewness) exhibit low (high) returns on average. Second, the estimated premium for bearing market volatility (skewness) risk is negative (positive), robust to the two approaches employed, and statistically and economically significant. Third, in contrast with studies on the US stock market, we identify the existence of a size premium in the European stock market: small capitalization stocks earn higher returns than high capitalization stocks.
Moment risk premia and the cross-section of stock returns in the European stock market / Elyasiani, Elyas; Gambarelli, Luca; Muzzioli, Silvia. - In: JOURNAL OF BANKING & FINANCE. - ISSN 1872-6372. - 111:(2020), pp. 1-14. [10.1016/j.jbankfin.2019.105732]
Moment risk premia and the cross-section of stock returns in the European stock market
Luca Gambarelli;Silvia Muzzioli
2020
Abstract
This article investigates whether volatility, skewness, and kurtosis risks are priced in the European stock market and assess the signs and the magnitudes of the corresponding risk premia. To this end, we adopt two approaches: a model-free approach based on swap contracts, and a model-based approach built on portfolio-sorting techniques. A number of results are obtained. First, stocks with high exposure to innovations in implied market volatility (skewness) exhibit low (high) returns on average. Second, the estimated premium for bearing market volatility (skewness) risk is negative (positive), robust to the two approaches employed, and statistically and economically significant. Third, in contrast with studies on the US stock market, we identify the existence of a size premium in the European stock market: small capitalization stocks earn higher returns than high capitalization stocks.File | Dimensione | Formato | |
---|---|---|---|
2020 EGM JBF2020.pdf
Accesso riservato
Descrizione: versione pubblicata
Tipologia:
Versione pubblicata dall'editore
Dimensione
1.48 MB
Formato
Adobe PDF
|
1.48 MB | Adobe PDF | Visualizza/Apri Richiedi una copia |
POST_PRINTj.jbankfin.2019.105732.pdf
Open access
Tipologia:
Versione dell'autore revisionata e accettata per la pubblicazione
Dimensione
1.33 MB
Formato
Adobe PDF
|
1.33 MB | Adobe PDF | Visualizza/Apri |
Pubblicazioni consigliate
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris