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Skewness in financial markets: Difference between revisions
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Skewness in general is a measure of asymmetry and uneven distribution. | Skewness in general is a measure of asymmetry and uneven distribution.<ref>https://en.wikipedia.org/wiki/Skewness</ref> | ||
In investing skewness describes the fact that both historical returns of companies as well as expected returns are unevenly distributed. | In investing skewness describes the fact that both historical returns of companies as well as expected returns of companies are unevenly distributed. | ||
== Historical Skewness == | == Historical Skewness == | ||
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== Skewness Prediction == | == Skewness Prediction == | ||
When looking at implied volatility via option pricing it | 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<ref>https://finance.yahoo.com/quote/%5ESKEW/</ref> uses that data to predict the skewness of stock market returns going forward <ref>https://www.investopedia.com/terms/s/skew-index.asp</ref>. It is measured between 100 and 150, with 150 indicating a high degree of skewness. | ||
== References == | |||