Skewness of return distribution and coefficient of risk premium |
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Authors: | Fenghua Wen Xiaoguang Yang |
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Institution: | (1) School of Economics and Management, Changsha University of Science and Technology, Changsha, 410076, China;(2) Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China |
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Abstract: | The skewness of the return distribution is one of the important features of the security price. In this paper, the authors
try to explore the relationship between the skewness and the coefficient of risk premium. The coefficient of the risk premium
is estimated by a GARCH-M model, and the robust measurement of skewness is calculated by Groeneveld-Meeden method. The empirical
evidences for the composite indexes from 33 securities markets in the world indicate that the risk compensation requirement
in the market where the return distribution is positively skewed is virtually zero, and the risk compensation requirement
is positive in a significant level in the market where the return distribution is negative skewed. Moreover, the skewness
is negatively correlated with the coefficient of the risk premium.
This research is supported by China Natural Science Foundation (70701035, 70425004, and 70221001), Hunan Natural Science Foundation
(09JJ1010), and the Key Research Institute of Philosophies and Social Sciences in Hunan Universities. |
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Keywords: | Coefficient of risk premium return distribution robust skewness speculation |
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