Skewness and kurtosis factors and asset pricing in Borsa İstanbul

Gürbüz, Aybike
Asset pricing always attracted a lot of attention in the finance world literature and it is built mainly on the mean-variance framework of the Capital Asset Pricing Model (CAPM). Although CAPM is commonly used by academics and practitioners, its validity is often questioned. The researchers have investigated the significance of CAPM by empirical tests, and there is a fairly large body of the literature about the shortcomings of the model. For these reasons, researchers on asset pricing have started to develop different models and consider higher moments in asset pricing. The aim of this study is to determine the effect of skewness and kurtosis factors on the variation of portfolio excess returns in Borsa Istanbul (BIST) over the period from January 1990 to June 2013. Excess returns are calculated for portfolios that are formed according to the size, book to market, momentum, coskewness, and cokurtosis factors. The Fama-French three-factor model is used as the base model and skewness and kurtosis factors are added to the base model separately. The incremental effect of skewness and kurtosis factors over the Fama- French factors is examined with time series regressions.


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Citation Formats
A. Gürbüz, “Skewness and kurtosis factors and asset pricing in Borsa İstanbul,” M.S. - Master of Science, Middle East Technical University, 2014.