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Asset Pricing with Systematic Skewness: Then and Now

Author

Listed:
  • Dan Anghel

    (Bucharest University of Economic Studies - IMAR - "Simion Stoilow" Institute of Mathematics - Romanian Academy of Sciences)

  • Petre Caraiani

    (Romanian Academy)

  • Alina Rosu

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Ioanid Rosu

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

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 Anghel & Petre Caraiani & Alina Rosu & Ioanid Rosu, 2021. "Asset Pricing with Systematic Skewness: Then and Now," Working Papers hal-03836999, HAL.
    • Handle: RePEc:hal:wpaper:hal-03836999
    DOI: 10.2139/ssrn.3872128
    as

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