An analysis of skewness and skewness persistence in three emerging markets

Abstract

This paper reports an investigation into the extent and persistence of skewness in stock returns in three emerging markets, namely The Czech Republic, Kenya and Poland. Thee study is undertaken using the extended skew normal distribution and an asymmetric version of the generalised error distribution. The motivation for this paper is the hypothesis that skewness is a particular feature of returns in emerging markets; it may lack persistence and may decline in absolute terms as time passes and the market matures. When daily returns are considered, the majority of stocks in all three markets exhibit a significant degree of skewness. The value of the skewness parameter is often different in each of the three estimation periods considered. Little evidence has been found to support the view that skewness is an artifact of emerging or evolving markets. Over the period covered by the study, the number of stocks with a significant degree of skewness has remained more or less the same. For weekly returns, the same conclusions apply to The Czech Republic and to Kenya, but there is far less evidence of skewness in weekly returns on Polish Stocks.

On the Multivariate Extended Skew-Normal, Normal-Exponential, and Normal-Gamma Distributions

“…Bekaert et al (1998) is concerned specifically with emerging markets. The data set used here was selected as it is employed in Adcock and Shutes (2005). In this paper it is reported that there is evidence to support the view that skewness in the Czech market was persistent for the period covered in that study.…”

The effects of skewness on optimal production and hedging decisions: An application of the skew‐normal distribution

“…Adcock and Shutes (2005) find that the skew-normal distribution provides better descriptions of stock returns in the Czech Republic, Kenya, and Poland than the normal distribution. Harvey, Liechty, Lietchy, and Muller (2004) apply the Bayesian approach to skew-normal distribution to determine the optimal portfolio within a family of linear utility functions.…”

Diversificación Internacional de Portafolios en Colombia por Medio de ETF

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