Idiosyncratic Skewness or Coskewness? Evidence from Commodity Futures Returns
38 Pages Posted: 7 Jun 2019
Date Written: May 21, 2019
We examine the ability of idiosyncratic skewness and coskewness to explain the cross section of commodity returns at the characteristics and factor levels, and find that idiosyncratic skewness is significantly related to the cross section of commodity returns, whereas coskewness is not. Furthermore, we construct a tradeable factor based on idiosyncratic skewness and find that it is significantly priced cross-sectionally in commodity futures. In addition, a new measure of idiosyncratic skewness (IE) proposed by Jiang, Wu, Zhou, and Zhu (2018) is stronger and more robust in capturing the skewness or asymmetry effect at both the characteristics and factor levels.
Keywords: Total skewness; Idiosyncratic skewness; Coskewness; Commodity futures return
JEL Classification: G13; G14
Suggested Citation: Suggested Citation