Abstract

http://ssrn.com/abstract=1761446
 
 

References (64)



 
 

Citations (5)



 


 



Conditional Skewness of Stock Market Returns in Developed and Emerging Markets and its Economic Fundamentals


Eric Ghysels


University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Alberto Plazzi


University of Lugano - Institute of Finance; Swiss Finance Institute

Rossen I. Valkanov


University of California, San Diego (UCSD) - Rady School of Management

February 14, 2011

Swiss Finance Institute Research Paper No. 11-06

Abstract:     
We use a quantile-based measure of conditional skewness (or asymmetry) that is robust to outliers and therefore particularly suited for recalcitrant series such as emerging market returns. Our study is on the following portfolio returns: developed markets, emerging markets, the world, and separately 73 countries. We find that the conditional asymmetry of returns varies significantly over time, even after accounting for conditional volatility and unconditional skewness effects. Interestingly, the correlation of conditional asymmetry between developed and emerging markets is surprisingly low, despite the fact that their return co-movement has been historically high and increasing. We also document a strong relationship between conditional asymmetry and macroeconomic fundamentals. Moreover, the low correlation across developed and emerging markets can largely be explained by their opposite response to those fundamentals. The economic significance of conditional skewness is demonstrated in an international portfolio setting. Tilting the portfolio weights away from a value-weighted allocation and toward emerging markets produces significant portfolio gains.

Number of Pages in PDF File: 66

Keywords: Skewness, Developed Markets, Emerging Markets, Quantile estimation, MIDAS

JEL Classification: G1, G10, G15

working papers series


Download This Paper

Date posted: February 14, 2011 ; Last revised: September 18, 2012

Suggested Citation

Ghysels, Eric and Plazzi, Alberto and Valkanov, Rossen I., Conditional Skewness of Stock Market Returns in Developed and Emerging Markets and its Economic Fundamentals (February 14, 2011). Swiss Finance Institute Research Paper No. 11-06. Available at SSRN: http://ssrn.com/abstract=1761446 or http://dx.doi.org/10.2139/ssrn.1761446

Contact Information

Eric Ghysels
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)
HOME PAGE: http://www.unc.edu/~eghysels/
Alberto Plazzi (Contact Author)
University of Lugano - Institute of Finance ( email )
Via Buffi 13
CH-6900 Lugano
Switzerland
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Rossen Valkanov
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
858-534-0898 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 1,859
Downloads: 375
Download Rank: 41,858
References:  64
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.328 seconds