Idiosyncratic coskewness and default risk in the spanish stock market

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Revista Espanola de Financiacion y Contabilidad, ISSN: 2332-0753, Vol: 43, Issue: 3, Page: 290-315

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Ana González-Urteaga; Luis Muga; Rafael Santamaría
Informa UK Limited
Business, Management and Accounting; Economics, Econometrics and Finance
article description
This paper analyses the relationship between asymmetric risk, proxied by idiosyncratic coskewness and coskewness measures, and default risk in the Spanish stock market. We have found that those stocks with greater asymmetric risk provide higher returns during the period considered, primarily those with positive idiosyncratic coskewness. However, neither risk factors built based on this measure nor the risk factor for coskewness provides explanatory power for the differential return between the portfolios sorted on default risk. The size factor (SMB) exhibits some explanation power to those returns, both in expansion periods and during the period of financial crisis. Idiosyncratic coskewness risk factors show explanatory capacity only for extreme default risk portfolios and during the international financial crisis period.