A skew test on financial returns in the Colombian market

Marisol Valencia () and Alejandro Bedoya ()
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Marisol Valencia: Universidad Nacional de Colombia
Alejandro Bedoya: Universidad Nacional de Colombia

Lecturas de Economía, 2014, issue 80, 79-102

Abstract: The characterization of financial returns depends heavily on probabilistic behavior, which can be ill-fitted, thus leading to inappropriate economic decisions concerning asset pricing, portfolio allocation and/or the measurement of market risk. In this paper, we propose a test to determine the adjustment of the returns of the General Index of the Colombian Stock Exchange (IGBC) to the following distributions: Normal, Skew Normal, and Skew T. In addition, we measure the level of bias and compare our test’s performance with an alternative test used only for detecting asymmetry. We find that the proposed test allows for characterizing returns in the Colombian stock market with one of the probability distributions, unlike the other test, which only provides a warning about the existence of bias and does not ascertain the distribution representing its behavior.

Keywords: Investment Decisions; Financial Economics; Specific Distributions; Behavioral Finance (search for similar items in EconPapers)
JEL-codes: C46 G02 G11 P34 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2014:i:80:p:79-102

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DOI: 10.17533/udea.le.n80a3

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