Journal of Finance Vol. 40 No. 4 1985
Asset Pricing, Higher Moments, and the Market Risk Premium: A Note
open access
Abstract
The purpose of this note is to examine, theoretically, why the market risk premium (R^_ g\ raa y influence tests of asset pricing models with higher moments.When moments of higher order than the variance are added to a pricing model developed within the usual two-fund separation assump- tions, the market risk premium enters the pricing equation in a nonlinear fashion and is implicit in the estimation of each moment's coefficient.Unless this nonlinearity is recognized, incorrect conclusions regarding the tests of such models may result.
- DOI
- 10.1111/j.1540-6261.1985.tb02376.x
- Volume
- 40
- Issue
- 4
- Pages
- 1251-1253
- Language
- en
- Sources
- openalex crossref