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We provide evidence supporting Rubinstein's (1973) model that if returns are not normal, measuring risk requires more than just measuring covariance. Higher-order systematic comoments should be important to risk-averse investors who are concerned about the extreme outcomes of their investments. Our paper shows that the Fama-French factors [SMB (return on small stocks less the return on big stocks), HML (return on high book-to-market stocks less the return on low book-to-market stocks)] as well as the momentum and market liquidity factors can be explained by the higher-order systematic comoments, and it lends support to the traditional covariance risk-based theory without having to resort to behavior assumptions. Copyright (c) 2009, The Eastern Finance Association.

"This study demonstrates that intraday volume and return on LIFFE interest rate and currency futures exhibit an asymmetric volume-return relationship characterised by significantly larger volume associated with negative returns than with non-negative returns. This finding is unlike the stylised asymmetric relation often observed in equity markets, where the volume on price rise is larger than the volume on price decline. The asymmetric relationship in LIFFE futures is also found to be dynamic as the direction of asymmetry can reverse during the day. It has been argued in the past that a costly short sale restriction that requires a higher transaction cost on a short position than on a long position is responsible for the asymmetric effect in equity markets. Since such a restriction is absent in futures markets, they should not exhibit any asymmetric volume behaviour. Based on the results of this research, the costly short sale hypothesis is rejected. An alternative explanation of the asymmetric relation observed in futures is presented based on recent information models that take into consideration asymmetrically-informed traders, their dispersion of beliefs, quality and quantity of the information signal, and how the traders process it. The paper also confirms a strong U-shape trading pattern in 15-minute volume, but no such pattern is identified in intraday returns." Copyright (c) 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

This paper examines two stylized regularities in currency futures traded on the International Monetary Market. Short horizon returns (weekly and monthly) sampled over the period 1984-1994 exhibit significantly positive autocorrelations at moderate lags. The pattern of autocorrelations in returns is not radically affected when the sample is partitioned into two sub-periods around the 1987 market crash. The positive autocorrelation pattern implies that the increments in currency futures prices are not consistent with the random walk hypothesis. Instead, it is consistent with an investor's fads model, in which deviations in prices exhibit persistence for a long period. This process is characterized by positive autocorrelations in returns and a mean-averting behaviour in prices. A GARCH prediction model based on the fads process is explored in which the spot exchange rate serves as a proxy for the fundamental for the currency futures. Deviations in the basis (the difference of the log spot exchange rate and the log futures exchange rate) can significantly predict returns up to 36 months.

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