Do Stock Markets Price Skewness? New Evidence from Quantile Regression Skewness Forecasts

Aretz, Kevin; Arisoy, Eser

Aretz, Kevin; Arisoy, Eser (2017), Do Stock Markets Price Skewness? New Evidence from Quantile Regression Skewness Forecasts. https://basepub.dauphine.fr/handle/123456789/16340

Type

Document de travail / Working paper

External document link

http://dx.doi.org/10.2139/ssrn.2494291

Date

2017

Publisher

Université Paris-Dauphine

Series title

Cahier de recherche DRM

Published in

Paris

Metadata

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Author(s)

Aretz, Kevin
Arisoy, Eser

Abstract (EN)

We use density forecasts derived from recursively estimated quantile regressions to calculate a forecast of the physical skewness of an asset's future return distribution. The forecast is unbiased and efficient, and it can easily be adapted to forecast the skewness of returns calculated over any conceivable return interval. Using Neuberger's (2012) realized physical skewness, we show that our quantile regression skewness forecast outperforms other variables proposed in the literature. Despite this, it does not condition the cross-section of future stock returns, neither independently nor when combined with other forecasts. Overall, we cast doubt on whether stock markets price expected stock skewness.

Subjects / Keywords

Asset pricing, ex-ante physical skew, realized skewness, quantile regression models; G11; G12; G15

JEL

G15 - International Financial Markets
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
G11 - Portfolio Choice; Investment Decisions