European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 1432: Asset Pricing with Systematic Skewness: Two Decades Later

Dan Anghel, Petre Caraiani, Alina Rosu and Ioanid Rosu
Additional contact information
Dan Anghel: Bucharest University of Economic Studies
Petre Caraiani: Romanian Academy
Alina Rosu: HEC Paris
Ioanid Rosu: HEC Paris

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

JEL-codes: G12

46 pages, July 8, 2021

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