Affiliation:
1. Banking Faculty Banking Academy of Vietnam Hanoi Viet Nam
2. Norwich Business School University of East Anglia Norwich Research Park UK
Abstract
AbstractWe seek the best skewness models for portfolio choice decisions. To this end, we compare the predictive ability and portfolio performance of several prominent skewness models in a sample of 10 international equity market indices. Overall, models that employ information from the option markets outperform models that only rely on stock returns. We propose an option‐based skewness estimator that accounts for the skewness risk premium. This estimator offers the most informative forecasts of future skewness, the lowest prediction errors, and the best portfolio performance in most of our tests.
Subject
Economics and Econometrics,Finance,General Business, Management and Accounting,Accounting