Asset Pricing with Systematic Skewness: Then and Now

Dan Anghel (1) , Petre Caraiani (2) , Alina Rosu (3) , Ioanid Rosu (3)

1 Bucharest University of Economic Studies
2 Romanian Academy
3 HEC Paris - Ecole des Hautes Etudes Commerciales

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.

Mots clés: Skewness; coskewness; three-moment CAPM; persistent factors; expected return

Domaines: Gestion et management

Dan Anghel, Petre Caraiani, Alina Rosu, Ioanid Rosu. Asset Pricing with Systematic Skewness: Then and Now. 2021. ⟨hal-03836999⟩