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The Skewness-Kurtosis plane for non-Gaussian systems: The case of hedge fund returns

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  • Karagiorgis, Ariston
  • Drakos, Konstantinos

Abstract

Financial returns exhibit deviations from Gaussianity, with their higher moments denoting turbulent and complex underlying systems. What is less known, is that Kurtosis and Skewness are correlated, with their interrelationship obeying well defined rules, albeit not exact, where the S-K plane is generally compatible with a parabolic form. The properties of the S-K plane for hedge funds are examined, exploiting the panel structure of the data, by estimating a quadratic model. We prove that the architecture of the plane exhibits significant variations across the various investment strategies, while the results remain unaffected after a sensitivity analysis.

Suggested Citation

  • Karagiorgis, Ariston & Drakos, Konstantinos, 2022. "The Skewness-Kurtosis plane for non-Gaussian systems: The case of hedge fund returns," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:intfin:v:80:y:2022:i:c:s1042443122001111
    DOI: 10.1016/j.intfin.2022.101639
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    More about this item

    Keywords

    Hedge funds; Higher moments; Skewness; Kurtosis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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