coskewness premium
What it checks
Stocks that crash hardest when the market crashes (negative coskewness) are compensated with a higher risk premium. Conversely, stocks that act like insurance during market crashes underperform on average. Rank stocks by their 1-year coskewness with SPY.
Mechanism
Stocks with negative coskewness with the market (left-tail co-movement) earn a positive risk premium: investors require additional return for assets that perform poorly when the market crashes. Signal is the rolling cross-product of ticker return with squared market return.
Signal rule
252d rolling coskew with SPY; bottom decile (most negative) fires LONG; top decile (positive, protective-put-like) fires SHORT, hold 63/126d.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
Expected edge
- Paper alpha
- +/-3-5% annualized
- Paper window
- T+1 to T+126d
Harvey-Siddique 2000; ~3-5% annualized risk premium on the bottom decile.
Related families
low volatility anomalyMacroLow-vol stocks earn higher risk-adjusted returns; benchmark-relative institutional incentives are the channel.
lottery maxMomentumHigh recent maximum daily returns predict underperformance (Bali-Cakici-Whitelaw 2011) โ used as a fade signal: stay flat or short when the rolling 1- or 3-month max daily return is in the top 10-20% of own history. Two variants per lookback: flat_when_lottery (zero exposure during the lottery regime) and short_when_lottery (active short capturing the full underperformance).
Explore coskewness premium on alphactor.ai
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