Asset Pricing with Systematic Skewness: Two Decades Later

Dan Gabriel Anghel, Petre Caraiani, Alina RoÅŸu and Ioanid RoÅŸu

Critical Finance Review, 2023, vol. 12, issue 1-4, 309-354

Abstract: We reexamine the asset pricing performance of systematic skewness (‘‘coskewness’’), a risk factor in the three-moment CAPM model of Kraus and Litzenberger (1976). In an influential paper, Harvey and Siddique (2000) test a coskewness factor constructed by sorting stocks on past coskewness. We replicate and extend their paper. Overall, coskewness appears to be priced in the cross section of stocks, especially when using an alternative coskewness proxy like (i) the predicted systematic skewness (PSS) of Langlois (2020), where coskewness is predicted by various firm characteristics, or (ii) a modified PSS factor (mPSS) that uses only return-based characteristics.

Keywords: Skewness; Coskewness; Three-moment CAPM; Persistent factors; Expected return (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Asset Pricing with Systematic Skewness: Two Decades Later (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000133

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