Skewness
Definition
A statistical measure of the asymmetry of a return distribution around its mean. Negative skewness indicates a longer left tail — higher probability of large downside moves.
Formula / Rules
Skewness = E[(X−μ)³/σ³]
Example
Negative skewness in equity returns means occasional large drawdowns, even when average returns are positive.
Related Terms
Frequently Asked Question
What is Skewness in finance?
Skewness measures distribution asymmetry. Negative skew = frequent small gains + occasional large losses (typical for stocks). Positive skew = frequent small losses + occasional large gains (e.g., options buying).
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.