A Coronavirus Asset Pricing Model: The Role of Skewness

Manthos Delis (elmanthos@hotmail.com), Christos Savva (christos.savva@cut.ac.cy) and Panayiotis Theodossiou

MPRA Paper from University Library of Munich, Germany

Abstract: We study an equilibrium risk and return model to explore the effects of the coronavirus crisis and associated skewness. We derive the moment and equilibrium equations, specifying skew-ness price of risk as an additive component of the effect of variance on mean expected return. We estimate our model using the flexible skewed generalized error distribution, for which we derive the distribution of returns and the likelihood function. Using S&P 500 Index returns from January 1990 to mid-May 2020, our results show that the coronavirus crisis generated the most negative reaction in the skewness price of risk, more negative even than the subprime crisis.

Keywords: Asset pricing; Risk and return; Skewness; Coronavirus crisis; Subprime crisis (search for similar items in EconPapers)
JEL-codes: C32 C51 G01 G11 G12 (search for similar items in EconPapers)
Date: 2020-06-04
New Economics Papers: this item is included in nep-fmk and nep-rmg
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