Economics, Econometrics and Finance
5 years ago

New study reveals profitable investment strategy for predicting stock returns!

Journal of Derivatives and Quantitative Studies 선물연구
Information Content of Skewness Risk Premium
Seok Goo Nam, Byung Jin Kang

Paper Summary

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The article breaks down variance risk premium into downside and upside components to create skewness risk premium, which is better at predicting future stock returns. The skewness risk premium was found to be more effective than the variance risk premium in forecasting stock returns. The study also developed a profitable investment strategy based on skewness risk premium, showing its potential for practical application in the financial market.