Low Risk Anomalies?

Schneider, Paul and Wagner, Christian and Zechner, Josef (2020) Low Risk Anomalies? Journal of Finance, 75 (5). pp. 2673-2718. ISSN 1540-6261

Available under License Creative Commons: Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0).

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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.

Item Type: Article
Divisions: Departments > Finance, Accounting and Statistics > Finance, Banking and Insurance
Forschungsinstitute > Strategische Kapitalmarktforschung
Version of the Document: Published
Depositing User: Gertraud Novotny
Date Deposited: 09 Jul 2020 12:31
Last Modified: 13 Oct 2020 13:16
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/92083/
URI: https://epub.wu.ac.at/id/eprint/7673


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