Co-Skewness Across Return Horizons

Résumé du livre

In this paper, the impact of investment horizon on asset co-skewness is examined both empirically and theoretically. We detail a strong horizon-based estimation bias for co-skewness. An asset that has positive co-skewness in one horizon may have negative co-skewness in another. This phenomenon is particularly evident for small-capitalization stocks. We propose a theoretical model to estimate long-horizon co-skewness using the shortest horizon data, which emphasizes the role of adjustment delays in pricing market-wide information among securities. Moreover, in the absence of intertemporal correlation, we show that co-skewness remains horizon-dependent. Our findings are robust to alternative specifications and have strong implications for asset pricing or portfolio allocation with co-skewness.