Abstract
| Language | English |
|---|---|
| Date | 2017 |
| Number of pages | 72 |
| DOIs | |
| State | Published - 2017 |
| Event | The 77th Annual Meeting of American Finance Association. AFA 2017 - Sheraton Grand Chicago, Chicago, United States Duration: 6 Jan 2017 → 8 Jan 2017 Conference number: 77 http://www.afajof.org/details/page/8672741/Paper-Submission-2017.html |
Conference
| Conference | The 77th Annual Meeting of American Finance Association. AFA 2017 |
|---|---|
| Number | 77 |
| Location | Sheraton Grand Chicago |
| Country | United States |
| City | Chicago |
| Period | 06/01/2017 → 08/01/2017 |
| Internet address |
Keywords
- Low risk anomaly
- Skewness
- Risk premia
- Equity options
Cite this
}
Low Risk Anomalies? / Schneider, Paul; Wagner, Christian; Zechner, Josef.
2017. Paper presented at The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, United States.Research output: Contribution to conference › Paper › Research › peer-review
TY - CONF
T1 - Low Risk Anomalies?
AU - Schneider,Paul
AU - Wagner,Christian
AU - Zechner,Josef
PY - 2017
Y1 - 2017
N2 - This paper shows that stocks' CAPM alphas are negatively related to CAPM betas if investors demand compensation for negative skewness. Thus, high (low) beta stocks appear to underperform (outperform). This apparent anomaly merely reflects compensation for residual coskewness ignored by the CAPM. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual coskewness and alphas. Beta- and volatility-based low risk anomalies are largely driven by a single principal component, which is in turn largely explained by skewness. Controlling for skewness renders the alphas of betting-against-beta and -volatility insignificant.
AB - This paper shows that stocks' CAPM alphas are negatively related to CAPM betas if investors demand compensation for negative skewness. Thus, high (low) beta stocks appear to underperform (outperform). This apparent anomaly merely reflects compensation for residual coskewness ignored by the CAPM. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual coskewness and alphas. Beta- and volatility-based low risk anomalies are largely driven by a single principal component, which is in turn largely explained by skewness. Controlling for skewness renders the alphas of betting-against-beta and -volatility insignificant.
KW - Low risk anomaly
KW - Skewness
KW - Risk premia
KW - Equity options
KW - Low risk anomaly
KW - Skewness
KW - Risk premia
KW - Equity options
U2 - 10.2139/ssrn.2593519
DO - 10.2139/ssrn.2593519
M3 - Paper
ER -