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Realized skewness at high frequency and link to conditional market premium
Zhi Liu1; Kent Wang2; Junwei Liu3
Conference NameAsian Finance Association (AsFA) 2013 Conference
Source Publicationproceedings of Asian Finance Association (AsFA) 2013 Conference
Conference Date15‐17 JULY 2013
Conference PlaceNanchang, China

We propose a reliable new measure for realized skewness, which is robust to microstructure noise at an ultra-high frequency level. Asymptotic theory for the new estimator has been derived and simulation studies verify its superior performance. We apply the new estimator to tick data of the S&P 500 index to forecast the equity premium in the U.S. market from 1990 to 2011 and find that it has significant forecastability, both in sample and out-of-sample. We also show that the new skewness measure plus the variance risk premium provides the right decomposition for the skewness risk. We thus provide evidence that the realized skewness is linked to the conditional market premium.

KeywordHigh-frequency Jump Microstructure Noise Realized Skewness Stock Return Prediction
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Document TypeConference paper
CollectionFaculty of Science and Technology
Affiliation1.Department of Mathematics, University of Macau, Macau SAR, China
2.The Wangyanan Institute for Studies in Economics, Xiamen University, China
3.China Financial Futures Exchange, Shanghai, China
First Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Zhi Liu,Kent Wang,Junwei Liu. Realized skewness at high frequency and link to conditional market premium[C],2014.
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