Coskewness and cokurtosis in futures markets

Abstract

The contribution of the third and fourth moments in explaining the return-generating process in futures markets remains unresolved. This study attempts to resolve this issue by using a four-moment model and by sampling 28 futures contracts and nine market proxies. Such sampling provides wide representation of futures markets and lends a high degree of robustness to the results. Our results show that the second, third and fourth moments are all important in explaining futures returns. Evidence from regression tests show increases in explanatory power as the third and fourth moments are included. The results are robust to the market proxy used. © 2001 Elsevier Science B.V.