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. Market Risk Premium

    The difference between the expected return on a market portfolio ...
  2. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  3. Skewness

    Describe asymmetry from the normal distribution in a set of statistical ...
  4. Covariance

    A measure of the degree to which returns on two risky assets ...
  5. Kurtosis

    A statistical measure used to describe the distribution of observed ...
  6. Beta

    A measure of the volatility, or systematic risk, of a security ...
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. 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".
  6. 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".
  7. Professionals

    How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a shortage or surplus.
  8. Fundamental Analysis

    Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger market exchanges.
  9. Fundamental Analysis

    What is the difference between cost of equity and cost of capital?

    Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required returns on raised capital.
  10. Fundamental Analysis

    What is arbitrage pricing theory?

    Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate risk-free profit opportunities.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center