Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations

Thiago Revil T. Ferreira
Additional contact information
Thiago Revil T. Ferreira: https://www.federalreserve.gov/econres/thiago-r-t-ferreira.htm

No 1223, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using U.S. data from 1926 to 2015, I show that financial skewness?a measure comparing cross-sectional upside and downside risks of the distribution of stock market returns of financial firms?is a powerful predictor of business cycle fluctuations. I then show that shocks to financial skewness are important drivers of business cycles, identifying these shocks using both vector autoregressions and a dynamic stochastic general equilibrium model. Financial skewness appears to reflect the exposure of financial firms to the economic performance of their borrowers.

Keywords: Cross-Sectional Skewness; Business Cycle Fluctuations; Financial Channel (search for similar items in EconPapers)
JEL-codes: C32 E32 E37 E44 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-03-06
New Economics Papers: this item is included in nep-bec, nep-dge, nep-fmk, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/ifdp/files/ifdp1223.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1223

DOI: 10.17016/IFDP.2018.1223

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().