The Pricing of Skewness Over Different Return Horizons

Kevin Aretz and Y. Eser Arisoy

Journal of Banking & Finance, 2023, vol. 148, issue C

Abstract: While recent theoretical and empirical work suggests that the physical skewness of a stock’s future discrete return distribution prices stocks, it does not tell us over which return horizon(s) that physical skewness is priced. Developing a novel block bootstrap estimator that allows us to calculate realized return skewness over arbitrary horizons, we aim to identify those return horizons. In doing so, we first show that our block bootstrap estimator produces more accurate realized skewness estimates than other recent estimators do. Next, we report that the existing skewness proxies used in the empirical asset pricing literature differ in how well they predict skewness over short or long return horizons. Finally, we reveal that the skewness pricing evidence documented in the empirical asset pricing literature is mostly driven by skewness over short (and not long) return horizons.

Keywords: asset pricing; physical skewness; realized skewness; quantile regression models (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:148:y:2023:i:c:s037842662200293x

DOI: 10.1016/j.jbankfin.2022.106713

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