It is a matter of common observation that investors value substantial gains but are averse to heavy losses. Obvious as it may sound, this translates into an interesting preference for right-skewed return distributions, whose right tails are heavier than their left tails. Skewness is thus not only a way to describe the shape of a distribution, but also a tool for risk measurement. We review the statistical literature on skewness and provide a comprehensive framework for its assessment. Then, we present a new measure of skewness, based on the decomposition of variance in its upward and downward components. We argue that this measure fills a gap in the literature and show in a simulation study that it strikes a good balance between robustness and sensitivity.

Assessing skewness in financial markets / Campisi, G.; La Rocca, L.; Muzzioli, S.. - In: STATISTICA NEERLANDICA. - ISSN 0039-0402. - 77:1(2023), pp. 48-70. [10.1111/stan.12273]

Assessing skewness in financial markets

Campisi G.;La Rocca L.;Muzzioli S.
2023

Abstract

It is a matter of common observation that investors value substantial gains but are averse to heavy losses. Obvious as it may sound, this translates into an interesting preference for right-skewed return distributions, whose right tails are heavier than their left tails. Skewness is thus not only a way to describe the shape of a distribution, but also a tool for risk measurement. We review the statistical literature on skewness and provide a comprehensive framework for its assessment. Then, we present a new measure of skewness, based on the decomposition of variance in its upward and downward components. We argue that this measure fills a gap in the literature and show in a simulation study that it strikes a good balance between robustness and sensitivity.
2023
30-mag-2022
77
1
48
70
Assessing skewness in financial markets / Campisi, G.; La Rocca, L.; Muzzioli, S.. - In: STATISTICA NEERLANDICA. - ISSN 0039-0402. - 77:1(2023), pp. 48-70. [10.1111/stan.12273]
Campisi, G.; La Rocca, L.; Muzzioli, S.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/1295305
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