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Skewness

A measure of asymmetry in a return distribution. Negative skew means many small gains and occasional large losses; positive skew is the reverse.

Most strategies that feel comfortable are negatively skewed: selling options, mean-reversion into support, carry trades, short volatility. They win often and lose big rarely, which flatters the win-rate and hides the risk in the sample you happen to have.

Trend following is typically positively skewed: a low win rate, many small losses, and a few very large winners. It feels awful to trade and is much harder to blow up with, because the bad outcome is a long grind rather than a single gap.

Numerically, skewness is the average cubed deviation from the mean divided by the cubed standard deviation. A daily equity index series often shows around -0.5 to -1.0; a short-premium strategy can show -3 or worse, which should be read as a warning label rather than a statistic.

Related: kurtosis, fat-tails, tail-risk, probabilistic-sharpe-ratio

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