Critical Finance Review > Vol 12 > Issue 1-4

Asset Pricing with Systematic Skewness: Two Decades Later

Dan Gabriel Anghel, Bucharest University of Economic Studies and Institute for Economic Forecasting, Romanian Academy, Romania, dan.anghel@fin.ase.ro , Petre Caraiani, Bucharest University of Economic Studies and Institute for Economic Forecasting, Romanian Academy, Romania, caraiani@ipe.ro , Alina Roşu, HEC Paris, France, alina.rosu@hec.edu , Ioanid Roşu, HEC Paris, France, rosu@hec.fr
 
Suggested Citation
Dan Gabriel Anghel, Petre Caraiani, Alina Roşu and Ioanid Roşu (2023), "Asset Pricing with Systematic Skewness: Two Decades Later", Critical Finance Review: Vol. 12: No. 1-4, pp 309-354. http://dx.doi.org/10.1561/104.00000133

Publication Date: 08 Aug 2023
© 2023 Dan Gabriel Anghel, Petre Caraiani, Alina Roşu and Ioanid Roşu
 
Subjects
 
Keywords
G12
Skewness, Coskewness, Three-moment CAPM, Persistent factors, Expected return
 

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In this article:
1. Introduction 
2. A Three-Moment CAPM 
3. Portfolio Formation and Summary Statistics 
4. Asset Pricing Tests for Coskewness 
5. Persistent Coskewness 
6. Conclusion 
References 

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.

DOI:10.1561/104.00000133

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