EconPapers    
Economics at your fingertips  
 

Modeling Conditional Skewness in Stock Returns

Markku Lanne and Pentti Saikkonen ()

No ECO2005/14, Economics Working Papers from European University Institute

Abstract: In this paper we propose a new GARCH-in-Mean (GARCH-M) model allowing for conditional skewness. The model is based on the so-called z distribution capable of modeling moderate skewness and kurtosis typically encountered in stock return series. The need to allow for skewness can also be readily tested. Our empirical results indicate the presence of conditional skewness in the postwar U.S. stock returns. Small positive news is also found to have a smaller impact on conditional variance than no news at all. Moreover, the symmetric GARCH-M model not allowing for conditional skewness is found to systematically overpredict conditional variance and average excess returns.

Keywords: Conditional skewness; GARCH-in-Mean; Risk-return tradeoff (search for similar items in EconPapers)
JEL-codes: C16 C22 G12 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cfn, nep-ecm, nep-ets, nep-fin, nep-fmk and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://cadmus.iue.it/dspace/bitstream/1814/3355/1/ECO2005-14.pdf main text
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Modeling Conditional Skewness in Stock Returns (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eui:euiwps:eco2005/14

Access Statistics for this paper

More papers in Economics Working Papers from European University Institute Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Cécile Brière ().

 
Page updated 2022-12-04
Handle: RePEc:eui:euiwps:eco2005/14