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Asset Pricing with Systematic Skewness: Two Decades Later

Author

Listed:
  • Dan Gabriel Anghel
  • Petre Caraiani
  • Alina RoÅŸu
  • Ioanid RoÅŸu

Abstract

We reexamine the asset pricing performance of systematic skewness (‘‘coskewness’’), a risk factor in the three-moment CAPM model of Kraus and Litzenberger (1976). In an influential paper, Harvey and Siddique (2000) test a coskewness factor constructed by sorting stocks on past coskewness. We replicate and extend their paper. Overall, coskewness appears to be priced in the cross section of stocks, especially when using an alternative coskewness proxy like (i) the predicted systematic skewness (PSS) of Langlois (2020), where coskewness is predicted by various firm characteristics, or (ii) a modified PSS factor (mPSS) that uses only return-based characteristics.

Suggested Citation

  • Dan Gabriel Anghel & Petre Caraiani & Alina RoÅŸu & Ioanid RoÅŸu, 2023. "Asset Pricing with Systematic Skewness: Two Decades Later," Critical Finance Review, now publishers, vol. 12(1-4), pages 309-354, August.
    • Handle: RePEc:now:jnlcfr:104.00000133
    DOI: 10.1561/104.00000133
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    More about this item

    Keywords

    Skewness; Coskewness; Three-moment CAPM; Persistent factors; Expected return;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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