Coskewness

AAA

DEFINITION of 'Coskewness'

A statistical measure that calculates the symmetry of a variable's probability distribution in relation to another variable's probability distribution symmetry. All else being equal, a positive coskewness means that the first variable's probability distribution is skewed to the right of the second variable's distribution.

INVESTOPEDIA EXPLAINS 'Coskewness'

In finance, coskewness can be used as a supplement to the covariance calculation of risk estimation. Usually, coskewness is calculated using a security's historic price data as the first variable, and the market's historic price data as the second. This provides an estimation of the security's risk in relation to market risk.

An investor would prefer a positive coskewness because this represents a higher probability of extreme positive returns in the security over market returns.

RELATED TERMS
  1. Statistics

    A type of mathematical analysis involving the use of quantified ...
  2. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  3. Covariance

    A measure of the degree to which returns on two risky assets ...
  4. Beta

    A measure of the volatility, or systematic risk, of a security ...
  5. Kurtosis

    A statistical measure used to describe the distribution of observed ...
  6. Market Risk Premium

    The difference between the expected return on a market portfolio ...
Related Articles
  1. Fundamental Analysis

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  2. Active Trading Fundamentals

    Measuring And Managing Investment Risk

    Risk is inseparable from return. Learn more about these measures and how to balance them.
  3. Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.
  4. Active Trading Fundamentals

    How The Sharpe Ratio Can Oversimplify Risk

    When it comes to hedge funds, this measure is not reliable on its own.
  5. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  6. Active Trading Fundamentals

    How To Convert Value At Risk To Different Time Periods

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  7. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  8. Personal Finance

    What is the average salary for an accountant?

    Learn about the average salaries of various accounting positions, and see the difference that an accounting degree makes in attaining higher wages.
  9. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  10. Economics

    Is the Bureau of Labor Statistics accurate?

    Read this brief analysis of the accuracy of Bureau of Labor Statistics, including a summary of the types of reports issued and how they are compiled.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center