Asset Pricing with Systematic Skewness: Two Decades Later

46 Pages Posted: 8 Jul 2021 Last revised: 3 Nov 2022

See all articles by Dan Anghel

Dan Anghel

Bucharest University of Economic Studies

Petre Caraiani

Romanian Academy

Alina Rosu

HEC Paris - Finance Department

Ioanid Rosu

HEC Paris - Finance Department

Date Written: February 23, 2022

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 Classification: G12

Suggested Citation

Anghel, Dan and Caraiani, Petre and Rosu, Alina and Rosu, Ioanid, Asset Pricing with Systematic Skewness: Two Decades Later (February 23, 2022). HEC Paris Research Paper No. FIN-2021-1432 , Available at SSRN: https://ssrn.com/abstract=3872128 or http://dx.doi.org/10.2139/ssrn.3872128

Dan Anghel

Bucharest University of Economic Studies ( email )

Romana Square no.6
Bucharest
Romania

Petre Caraiani

Romanian Academy

125, Calea Victoriei, Sector 1
Bucharest, RO - 01007
Romania

Alina Rosu

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Ioanid Rosu (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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