Search results
1 – 1 of 1Sumaira Chamadia, Mobeen Ur Rehman and Muhammad Kashif
It has been demonstrated in the US market that expected market excess returns can be predicted using the average higher-order moments of all firms. This study aims to empirically…
Abstract
Purpose
It has been demonstrated in the US market that expected market excess returns can be predicted using the average higher-order moments of all firms. This study aims to empirically test this theory in emerging markets.
Design/methodology/approach
Two measures of average higher moments have been used (equal-weighted and value-weighted) along with the market moments to predict subsequent aggregate excess returns using the linear as well as the quantile regression model.
Findings
The authors report that both equal-weighted skewness and kurtosis significantly predict subsequent market returns in two countries, while value-weighted average skewness and kurtosis are significant in predicting returns in four out of nine sample markets. The results for quantile regression show that the relationship between the risk variable and aggregate returns varies along the spectrum of conditional quantiles.
Originality/value
This is the first study that investigates the impact of third and fourth higher-order average realized moments on the predictability of subsequent aggregate excess returns in the MSCI Asian emerging stock markets. This study is also the first to analyze the sensitivity of future market returns over various quantiles.
Details