Third moment: Skewness
To calculate the third moment, or skewness of a returns distribution in Python, you can use the skew() function from scipy.stats.
Remember that a negative skew is a right-leaning curve, while positive skew is a left-leaning curve. In finance, you would tend to want positive skewness, as this would mean that the probability of large positive returns is unusually high, and the negative returns are more closely clustered and predictable.
StockPrices from the previous exercise is available in your workspace.
This exercise is part of the course
Introduction to Portfolio Risk Management in Python
Exercise instructions
- Import
skewfromscipy.stats. - Drop missing values in the
'Returns'column to prevent errors. - Calculate the skewness of
clean_returns.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Import skew from scipy.stats
from ____ import ____
# Drop the missing values
clean_returns = ____
# Calculate the third moment (skewness) of the returns distribution
returns_skewness = ____
print(returns_skewness)