Abstract

This paper investigates a set of realised higher-order co-moment risk–return relationships in the Australian stock market. We test the predictive power of the asset pricing model by implementing the two-, three-, four-moment Capital Asset Pricing Model. Our findings show that investors respond differently to information related to realised higher-order co-moments, and that the corresponding gamma (normalised co-skewness) and kappa (normalised co-kurtosis) risk factors remain priced in the presence of continuous beta and jump beta. Furthermore, we find that the realised high-order co-moment risk measures are priced differently and remain significant even when combined with a set of firm characteristics.