Publication Type
Journal Article
Version
publishedVersion
Publication Date
9-2019
Abstract
This study investigates the cross-country impact of U.S. equity market skewness risk. We find that a large decrease in the U.S. market skewness significantly predicts higher future returns on international equity markets. The predictability remains significant after controlling for a set of U.S. and local forecasting variables. Furthermore, we find strong predictability in- an out-of-sample setting and the predictability delivers a large economic value. The U.S. market skewness also forecasts U.S. economic recessions and international market conditions, consistent with the international three-moment capital asset pricing model (three-moment CAPM) and the intertemporal capital asset pricing model (ICAPM).
Keywords
International stock markets, Market crash, Return predictability, Skewness risk
Discipline
Finance | Finance and Financial Management
Publication
Journal of International Money and Finance
Volume
96
First Page
210
Last Page
227
ISSN
0261-5606
Identifier
10.1016/j.jimonfin.2019.05.003
Publisher
Elsevier
Citation
CHEN, Jian; JIANG, Fuwei; XUE, Shuyu; and YAO, Jiaquan.
The world predictive power of U.S. equity market skewness risk. (2019). Journal of International Money and Finance. 96, 210-227.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6323
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jimonfin.2019.05.003