Examination Of The Effect Of Skewness And Excess Kurtosis On Stock Returns Description Through Capital Asset Pricing Model And Fama & French Three Factor Model

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Abstract

This article examines the relationship between return, systematic risk, skewness and kurtosis in Tehran stock exchange during 2002-2006. Similar research, in this field, shows different results on upward and downward markets, therefore the period under study is divided into sub periods including upward market (2002-2004) and downward market (2004-2006) and the relationship between these sub periods are examined independently. Regarding to this approach, totally 64 firms from different industries are selected. Then, daily price and market index data were collected. Findings indicate that beta and skewness play essential role in describing stock return in both periods. Anyhow, in the upward market excess kurtosis has a significant relationship while in the downward market there is not such a significant relationship. Based on Fama & French three factor model, none of these coefficients are statistically significant which this can be due to additional factors embedded in this model.

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Commercial Strategies
Volume 9, Issue 47
July 2011
Pages 155-162

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