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Second and higher moments of fundamentals: A literature review

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  • Yuecheng Jia
  • Ivilina Popova
  • Betty Simkins
  • Qin Emma Wang

Abstract

This literature review outlines the recent progress in fundamental second and higher moments of research. We survey the moments’ existence, formation, and financial market and macroeconomic implications. Research shows that time‐varying volatility and non‐Gaussian shocks exist throughout all measures of fundamentals at both the micro‐ and macro levels. In addition, the granular network among firms helps explain the origin of fundamental second and higher moments. Empirical evidence shows that the moments have strong predictive power on asset prices and macroeconomic variables. We also highlight several areas where more research is needed to better understand the moments.

Suggested Citation

  • Yuecheng Jia & Ivilina Popova & Betty Simkins & Qin Emma Wang, 2020. "Second and higher moments of fundamentals: A literature review," European Financial Management, European Financial Management Association, vol. 26(1), pages 216-237, January.
    • Handle: RePEc:bla:eufman:v:26:y:2020:i:1:p:216-237
    DOI: 10.1111/eufm.12215
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