Skewness in financial markets

Skewness in general is a measure of asymmetry and uneven distribution.

In investing skewness describes the fact that both historical returns of companies as well as expected returns of companies are unevenly distributed.

Historical Skewness

A study conducted by Hendrik Bessembinder (or use:Carey School of Business?) which observed stock return data going back to 1926 (is this correct?) concluded that only 4% of companies have been responsible for the entire outperformance of stocks against treasury bills.

Skewness Prediction

When looking at implied volatility via option pricing it becomes apparent that investors are expecting a higher degree of under- or outperformance of some stocks compared to others. The Skew Index uses that data to predict the skewness of stock market returns going forward . It is measured between 100 and 150, with 150 indicating a high degree of skewness.