CAPM of four moments and the market risk of Borhis and Cedevis
DOI:
https://doi.org/10.29201/peipn.v17i35.100Keywords:
four moments-CAPM, CAPM 4M, market risk, Borhis, CedevisAbstract
This study was carried out with the aim of testing the hypothesis that, given the characteristics of the risk present in the probability distribution of the returns of the mortgage-based bonds Borhis and Cedevis, a four-moment CAPM model (CAPM-4M) is required to explain the market risk of that mortgage-backed bonds. The characteristics of the probability distributions of the returns of both bonds and the Price and Quotation Index (IPC) of the Mexican Stock Exchange were analyzed finding, as could be expected, bias and kurtosis not typical of a normal probability distribution. The sensitivities of the Borhis and Cedevis returns at the second, third and fourth comoments were calculated with respect to the returns of the stock market index. The two bonds returns show high sensitivity to the coskewness with the Mexican stock market returns, but both of them have low exposure to the covariance and the coskewness. The evidence suggests the relevance of using a CAPM of four moments to explain the market risk of the Borhis and Cedevis. These sources of risk should be considered for the selection and management of portfolios that include these instruments, as well as for the design of risk management measures
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