Conditional skewness in asset pricing tests

Published

Journal Article

If asset returns have systematic skewness, expected returns should include rewards for accepting this risk. We formalize this intuition with an asset pricing model that incorporates conditional skewness. Our results show that conditional skewness helps explain the cross-sectional variation of expected returns across assets and is significant even when factors based on size and book-to-market are included. Systematic skewness is economically important and commands a risk premium, on average, of 3.60 percent per year. Our results suggest that the momentum effect is related to systematic skewness. The low expected return momentum portfolios have higher skewness than high expected return portfolios.

Full Text

Cited Authors

  • Harvey, CR; Siddique, A

Published Date

  • January 1, 2000

Published In

Volume / Issue

  • 55 / 3

Start / End Page

  • 1263 - 1295

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/0022-1082.00247

Citation Source

  • Scopus