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.

BREAKING DOWN '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. Probability Distribution

    A statistical function that describes all the possible values ...
  2. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  3. Variable Cost Ratio

    Variable costs expressed as a percentage of sales. The variable ...
  4. Shadowing

    The process of creating values for variables that don't rely ...
  5. Cokurtosis

    A statistical measure that calculates the degree of peak of a ...
  6. Random Variable

    A variable whose value is unknown or a function that assigns ...
Related Articles
  1. Investing

    Find The Right Fit With Probability Distributions

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

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  3. Investing

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  4. Investing

    What's a Sensitivity Analysis?

    Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable).
  5. Financial Advisor

    Variable Annuity Basics

    Find out how variable annuities can help you plan for retirement by offering the returns of the stock market with the guarantee of insurance.
  6. Investing

    Stock and Flow Variables Explained: A Closer Look at Apple

    The difference between stock and flow variables is an essential concept in finance and economics. We illustrate with financial statements from Apple Inc.
  7. Financial Advisor

    Variable Annuities: The Pros and Cons

    Variable annuities are one of the most complicated financial instruments. Here is an in depth look at their pros and cons.
  8. Investing

    Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.
  9. Investing

    What a Normal Distribution Means

    Normal distribution describes a symmetrical data distribution, where most of the results lie near the mean.
  10. Investing

    What is Covariance?

    Covariance is a concept used in statistics and probability theory to describe how two variables change when compared to one another. In business and investing, covariance is used to determine ...
RELATED FAQS
  1. What variables are most important when making a prediction through sensitivity analysis?

    Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >>
  2. How do you interpret the magnitude of the covariance between two variables?

    Learn more about covariance and how financial planners and economists use the concept. Explore an example of covariance in ... Read Answer >>
  3. What is the difference between direct costs and variable costs?

    Learn about variable costs and direct costs, how direct costs and variable costs are classified and the differences between ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center