A Premium for Negative Skew?
Xiong, Idzorek, and Ibbotson have a new paper coming out in the JPM showing that mutual funds with the highest tail risk (ie, highest probability of extreme downside returns) have higher returns. That is, there's a positive risk premium to negative skew. This is rather curious.
The only thing I saw in this field related to this found the opposite. That is, in a 2006 JoF paper, Kosowski, Timmermann, and Wermers, and White bootstrapped the alphas of the entire universe of U.S. domestic equity mutual funds, and found that the top decile had much more positive skewness than the median. The bottom decile had more negative skewness.
I don't have the data, but it can't be consistent with both findings.
The only thing I saw in this field related to this found the opposite. That is, in a 2006 JoF paper, Kosowski, Timmermann, and Wermers, and White bootstrapped the alphas of the entire universe of U.S. domestic equity mutual funds, and found that the top decile had much more positive skewness than the median. The bottom decile had more negative skewness.
I don't have the data, but it can't be consistent with both findings.
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