The World Predictive Power of U.S. Equity Market Skewness

47 Pages Posted: 7 Mar 2017 Last revised: 22 Jun 2019

See all articles by Jian Chen

Jian Chen

Xiamen University - School of Economics

Fuwei Jiang

Central University of Finance and Economics (CUFE)

Shuyu Xue

Southwestern University of Finance and Economics (SWUFE)

Jiaquan Yao

Jinan University - Management School

Date Written: April 2, 2019

Abstract

This study investigates the cross-country impact of U.S. equity market skewness risk. We find that a large decrease in the U.S. market skewness significantly predicts high future returns on international equity markets. The predictability remains significant after controlling for a set of U.S. and local forecasting variables. Furthermore, we find strong predictability in an out-of-sample setting and the predictability delivers a large economic value. The U.S. market skewness also forecasts U.S. economic recessions and international market conditions, consistent with the international three-moment capital asset pricing model (three-moment CAPM) and intertemporal capital asset pricing model (ICAPM).

Keywords: Return Predictability, International Stock Markets, Skewness, Market Crash

JEL Classification: C22, C53, G11, G12, G17

Suggested Citation

Chen, Jian and Jiang, Fuwei and Xue, Shuyu and Yao, Jiaquan, The World Predictive Power of U.S. Equity Market Skewness (April 2, 2019). Journal of International Money and Finance, Vol. 96, 2019, Available at SSRN: https://ssrn.com/abstract=2927920 or http://dx.doi.org/10.2139/ssrn.2927920

Jian Chen (Contact Author)

Xiamen University - School of Economics ( email )

422 Siming Nan Road
Xiamen, Fujian 361005
China

Fuwei Jiang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Shuyu Xue

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Jiaquan Yao

Jinan University - Management School ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
246
Abstract Views
1,715
rank
159,458
PlumX Metrics