THE IMPACT OF HIGHER MOMENTS AND NONSYSTEMATIC VOLATILITY ON FUTURE STOCK RETURN USING FAMA-MACBETH MODEL

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SHEKARKHAH JAVAD; BOLU GHASEM; HAGHIGHAT MOHAMMAD

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Journal: JOURNAL OF MANAGEMENT AND ACCOUNTIN SCHOOL Year:2018 | Volume:14 | Issue:56 Page(s): 83-107

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Title

THE IMPACT OF HIGHER MOMENTS AND NONSYSTEMATIC VOLATILITY ON FUTURE STOCK RETURN USING FAMA-MACBETH MODEL

Author(s)

SHEKARKHAH JAVAD | BOLU GHASEM | HAGHIGHAT MOHAMMAD | Issue Writer Certificate

Keywords

FUTURE STOCK RETURNQ2

SKEWNESS AND KURTOSIS EQUITY RETURN DISTRIBUTIONQ1

NONSYSTEMATIC VOLATILITYQ1

Abstract

In capital assets pricing model (CAPM) frame, the all effective factors in expected return, are summarized in Beta. As many assumptions in this model are not real, it necessitates the development of new models, and each one of them in its own part caused a new deficiency in mentioned assumptions. In CAPM the assumptions are based on the fact that distribution of returns is normal and all investors are risk averse. However, distribution of returns is not always normal and often there is a significant difference between normal distributions. Mean-variance can be the best method for decision making. If distribution of returns is not normal, then mean-variances generalization is not working. Existence of representative problems, valid or limited debts, correlation between volatility and pricing, and compound returns are factors lid to asymmetry in portfolio returns. As a result, this paper by using cross sectional data and based on Fama-Mac Beth model is analyzing the effect of higher moments on FUTURE STOCK RETURN. In this paper, because of applied target as descriptive research there is a correlation which the effect of skewness and kurtosis of equity return distribution and NONSYSTEMATIC VOLATILITY on FUTURE STOCK RETURN is examined by three different hypothesis. In order to accomplish this paper, a sample of 76 firms participating in Tehran exchange stock between 1389 to 1393 as systematically elimination is selected. As a result of this research, skewness coefficient is effective on FUTURE STOCK RETURN and has a negative relationship with it. On the other hand, whatever the skewness of distribution is negative, then the FUTURE STOCK RETURN is going up. And also there is a positive effect between NONSYSTEMATIC VOLATILITY of equity return and future’s return. On other word, investor by increasing NONSYSTEMATIC VOLATILITY and accepting higher risks, expects higher return in the future.

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APA: Copy

SHEKARKHAH, JAVAD, BOLU, GHASEM, & HAGHIGHAT, MOHAMMAD. (2018). THE IMPACT OF HIGHER MOMENTS AND NONSYSTEMATIC VOLATILITY ON FUTURE STOCK RETURN USING FAMA-MACBETH MODEL. JOURNAL OF MANAGEMENT AND ACCOUNTIN SCHOOL, 14(56 ), 83-107. SID. https://sid.ir/paper/242233/en

Vancouver: Copy

SHEKARKHAH JAVAD, BOLU GHASEM, HAGHIGHAT MOHAMMAD. THE IMPACT OF HIGHER MOMENTS AND NONSYSTEMATIC VOLATILITY ON FUTURE STOCK RETURN USING FAMA-MACBETH MODEL. JOURNAL OF MANAGEMENT AND ACCOUNTIN SCHOOL[Internet]. 2018;14(56 ):83-107. Available from: https://sid.ir/paper/242233/en

IEEE: Copy

JAVAD SHEKARKHAH, GHASEM BOLU, and MOHAMMAD HAGHIGHAT, “THE IMPACT OF HIGHER MOMENTS AND NONSYSTEMATIC VOLATILITY ON FUTURE STOCK RETURN USING FAMA-MACBETH MODEL,” JOURNAL OF MANAGEMENT AND ACCOUNTIN SCHOOL, vol. 14, no. 56 , pp. 83–107, 2018, [Online]. Available: https://sid.ir/paper/242233/en

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