Co-Skewness across Return Horizons*

Chenglu Jin, Thomas Conlon and John Cotter

Journal of Financial Econometrics, 2023, vol. 21, issue 5, 1483-1518

Abstract: In this article, the impact of investment horizon on asset co-skewness is examined both empirically and theoretically. We first detail a strong horizon-based estimation bias for co-skewness. An asset that has positive co-skewness at one horizon may have negative co-skewness for others. This phenomenon is particularly evident for small-capitalization stocks. We then propose a theoretical model to estimate long-horizon co-skewness using data observed at the shortest horizon, which emphasizes the role of adjustment delays in the pricing of market-wide information among securities. Co-skewness is only found to be priced in the cross-section of stock returns for a small range of short horizons, calling into question the universal validity of the three-moment model.

Keywords: asset pricing; co-skewness; intertemporal correlation; the horizon effect (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Co-skewness across Return Horizons (2022)
Working Paper: Co-skewness across Return Horizons (2019)
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