Empirically, co-skewness of asset returns seems to explain a substantial part of the cross-sectional variation of mean return not explained by beta. This finding is typically interpreted in terms of a risk averse representative investor with a cubic utility function. This paper questions this...

Downside risk, when properly defined and estimated, helps to explain the cross-section of US stock returns. Sorting stocks by a proper estimate of downside market beta leads to a substantially larger cross-sectional spread in average returns than sorting on regular market beta. This result...

The value premium substantially reduces for downside risk averse investors with a substantial fixed income exposure, such as insurance companies and pension funds. Growth stocks are attractive to these investors because they offer a good hedge against a bad bond performance. This result holds...

This study compares the single-factor CAPM with the Fama and French three-factor model and the Carhart four-factor model using a broad cross-section and long time-series of US stock portfolios and controlling for market capitalization. Confirming known results, multiple factors help for value...

The mean-semivariance CAPM better explains the cross-section of US stock returns than the traditional mean-variance CAPM does. If regular beta is replaced by downside beta, the cross-sectional risk-return relationship improves considerably. Especially during bad-states of the world, when the...

We analyze if the value-weighted stock market portfolio is second-order stochastic dominance (SSD) efficient relative to benchmark portfolios formed on size, value, and momentum. In the process, we also develop several methodological improvements to the existing tests for SSD efficiency....