Rolling yield skewness
factor.formula
The daily return skewness calculation formula is:
In the formula:
- :
The size of the time window for calculating the skewness, which is the number of trading days in the lookback period. For example, if the lookback period is 6 months, then T is the number of trading days in the 6-month period.
- :
The daily return of the ith asset on the tth day. The calculation formula is: $r_{it} = \frac{P_{it} - P_{it-1}}{P_{it-1}}$, where $P_{it}$ is the closing price of the ith asset on the tth day.
- :
The average daily return of the i-th asset in the time window T is calculated as follows: $\bar{r}i(T) = \frac{1}{T} \sum{t=1}^{T} r_{it}$.
factor.explanation
The rolling yield skewness factor reflects the asymmetry of the asset yield distribution. Positive skewness means that the right tail of the yield distribution is longer, that is, the probability of extreme positive returns is relatively high. Conversely, negative skewness means that the left tail of the yield distribution is longer, and the probability of extreme negative returns is higher. This factor is usually negatively correlated with the expected return of stocks. This may be because investors prefer assets with positive skewness, which leads to their overvaluation and thus lower expected future returns. The skewness factor is generally considered to be one of the manifestations of low-risk anomalies, but its effect may be affected by multiple factors such as market sentiment and investor behavior. Therefore, it should be combined with other factors for comprehensive consideration when used. In addition, choosing an appropriate time window T is also crucial to capturing the skewness effect.