




Skewness is a descriptive statistic that is used in analyzing the distribution of a set of data. In finance and investing, skewness is used in conjunction with other metrics, such as kurtosis and value at risk (VAR). When used to analyze investment returns, skewness measures the asymmetry of those returns. A normally distributed dataset would have a skewness of zero. Investment returns, however, do not usually show a normal distribution.
If investment returns are graphed and they show a positive skewness then the following descriptive statistics have the relation: mean > median > mode. When a distribution exhibits a negative skewness the relation is: mean < median < mode.
Skewness is an important consideration when examining investment returns because it can warn of the potential risk involved based on historical returns. Although a negative skewness can be indicative of a high frequency of relatively small gains, it could also warn of the possibility, though a remote one, of a result that is extremely negative.
Rate this Skewness definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: limit order, EBITDA, reverse mortgage, per diem, balance sheet, APR, option premium, cancelled check, required rate of return, debt service coverage, covered put, whollyowned subsidiary, Key Rate Duration, dividends payable, liquidity ratio, deferred revenue, labor relations, quality assurance, diluted share, margin rate, 144a, inflation, exdividend, in escrow, risk management, retained earnings, deferred tax, FICO score, 401a, stock split, 1035 exchange, phantom income, command economy, FTSE, minority interest, irrevocable trust, VIX, stock market close, average price per share, Zero Cost Collar, open position, 1031 exchange, current ratio, exdividend date, implied volatility, annual return, real GDP, LIBOR, class C shares


 