Co-skewness across Return Horizons

Chenlu Jin, Thomas Conlon and John Cotter

No 202210, Working Papers from Geary Institute, University College Dublin

Abstract: In this paper the impact of investment horizon on asset co-skewness is examined both empirically and theoretically. We first detail a strong horizon-based estimation bias for co-skewness. An asset that has positive co-skewness at one horizon may have negative co-skewness for others. This phenomenon is particularly evident for small-capitalization stocks. We then propose a theoretical model to estimate long-horizon co-skewness using data observed at the shortest horizon, which emphasizes the role of adjustment delays in the pricing of market-wide information among securities. Co-skewness is only found to be priced in the cross-section of stock returns for a small range of short-horizons, calling into question the universal validity of the three-moment model.

Keywords: Co-skewness; The Horizon Effect; Intertemporal Correlation; Asset Pricing (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2022-11-16
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http://www.ucd.ie/geary/static/publications/workingpapers/gearywp202210.pdf First version, 2022 (application/pdf)

Related works:
Journal Article: Co-Skewness across Return Horizons* (2023)
Working Paper: Co-skewness across Return Horizons (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:202210

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