Negative return skewness coefficient
factor.formula
Negative return skewness coefficient NCSKEW:
in:
- :
It represents the rate of return of stock i at time t. Usually, it can be calculated using the logarithmic rate of return, that is, $r_{it} = \ln(P_{it}) - \ln(P_{it-1})$, where $P_{it}$ is the price of stock i at time t.
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It represents the average return of stock i in the past n trading days, and the calculation formula is $\bar{r_i} = \frac{1}{n} \sum_{t=1}^{n} r_{it}$.
- :
Indicates the number of historical trading days used to calculate the return skewness coefficient. This parameter controls the length of the lookback time window, usually between 20-60. For example, n=20 means using the data of the past 20 trading days. In actual application, it needs to be adjusted according to the specific market environment and strategy.
factor.explanation
The negative return skewness coefficient (NCSKEW) measures the asymmetry of the stock return distribution, with a particular focus on the thickness of the left tail of the return distribution. A positive skewness indicates that the return distribution is right-skewed, that is, there is a higher probability of extreme positive returns (surges), while a negative skewness indicates that the return distribution is left-skewed, that is, there is a higher probability of extreme negative returns (surges). The larger the absolute value of the negative skewness, the thicker the left tail of the return distribution and the higher the risk of a stock crash. This indicator can be used to identify potential tail risks and may become an important basis for constructing risk premium models or tail risk hedging strategies. Stocks with high negative skewness usually have higher volatility, and investors usually require higher expected returns in order to bear this risk.