Conditional Skewness Modelling for Stock Returns

Kurt Brännäs () and Niklas Nordman ()
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Niklas Nordman: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 562, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The paper studies two approaches to modelling conditional skewness in a nonlinear model for stock returns. It is found that a normal distribution can be rejected. A log-generalized gamma distribution with one time-varying density parameter, and in particular a Pearson IV specification with three constant parameters are better supported by data. While the log-generalized gamma indicates that time-varying skewness is an important feature of the daily composite returns of NYSE, the Pearson IV model suggests that excess kurtosis rather than skewness should be accounted for.

Keywords: Time series; nonlinearity; Pearson IV; log-generalized gamma; NYSE (search for similar items in EconPapers)
JEL-codes: C22 C51 C52 C53 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-fin and nep-fmk
Date: 2001-06-01

Published in Applied Economics Letters , 2003, pages 725-728.

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Journal Article: Conditional skewness modelling for stock returns (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0562

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