On More Robust Estimation of Skewness and Kurtosis: Simulation and Application to the S&P500 Index
For both the academic and the financial communities it is a familiar stylized fact that stock market returns have negative skewness and excess kurtosis. This stylized fact has been supported by a vast collection of empirical studies. Given that the conventional measures of skewness and kurtosis are computed as an average and that averages are not robust, we ask, "How useful are the measures of skewness and kurtosis used in previous empirical studies?" To answer this question we provide a survey of robust measures of skewness and kurtosis from the statistics literature and carry out extensive Monte Carlo simulations that compare the conventional measures with the robust measures of our survey. An application of the robust measures to daily S&P500 index data indicates that the stylized facts might have been accepted too readily. We suggest that looking beyond the standard skewness and kurtosis measures can provide deeper insight into market returns behaviour.
|Date of creation:||01 Sep 2003|
|Date of revision:|
|Contact details of provider:|| Postal: 9500 Gilman Drive, La Jolla, CA 92093-0508|
Phone: (858) 534-3383
Fax: (858) 534-7040
Web page: http://www.escholarship.org/repec/ucsdecon/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harvey, Campbell R. & Siddique, Akhtar, 1999. "Autoregressive Conditional Skewness," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(04), pages 465-487, December.
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- Hwang, S. & Satchell, S. E., 1998.
"Modelling Emerging Market Risk Premia using Higher Moments,"
Cambridge Working Papers in Economics
9806, Faculty of Economics, University of Cambridge.
- Hwang, Soosung & Satchell, Stephen E, 1999. "Modelling Emerging Market Risk Premia Using Higher Moments," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(4), pages 271-96, October.
- Stephen Satchell & Soosung Hwang, 1999. "Modelling Emerging Market Risk Premia Using Higher Moments," Working Papers wp99-17, Warwick Business School, Finance Group.
- Campbell R. Harvey & Akhtar Siddique, 2000. "Conditional Skewness in Asset Pricing Tests," Journal of Finance, American Finance Association, vol. 55(3), pages 1263-1295, 06.
- Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
When requesting a correction, please mention this item's handle: RePEc:cdl:ucsdec:qt7b52v07p. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.