Autoregressive conditional skewness

We present a new methodology for estimating time-varying conditional skewness. Our model allows for changing means and variances, uses a maximum Likelihood framework with instruments, and assumes a non-central t distribution. We apply this method to daily, weekly, and monthly stock returns, and find that conditional skewness is important. In particular, we show that the evidence of asymmetric variance is consistent with conditional skewness. Inclusion of conditional skewness also impacts the persistence in conditional variance.