Coskewness

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. Variability

    The extent to which data points in a statistical distribution ...
  2. Sensitivity Analysis

    Sensitivity analysis is a technique used to determine how different ...
  3. Probability Distribution

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

    A measure that determines the degree to which two variable's ...
  5. Shadowing

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

    A statistical measure that calculates the degree of peak of a ...
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. Markets

    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. Trading

    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. Retirement

    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. Markets

    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. Trading

    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. Retirement

    Variable Annuities: The Good, The Bad and the Ugly

    An in-depth guide to everything you need to know and watch out for with variable annuities.
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. Which is wiser, rolling over my traditional IRA to variable annuity or vice versa? ...

    I am 46 years old. I have a traditional IRA and Variable Annuity. What will it cost me to roll either way? ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. How are variable annuities regulated?

    Discover the various rules that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority ... Read Answer >>
  6. What are the variables in variable costs?

    Learn about variable costs. Explore how and why these costs may fluctuate, as well as ways in which they may differ from ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center