How skewness affect risk-return tradeoff

What is it about?

The relationship between risk and return has been one of the most important and extensively investigated issues in the financial economics literature. The theoretical results predict a positive relation between the two. Nevertheless, the empirical findings so far have been contradictory. Evidence presented in this paper shows that these contradictions are the result of negative skewness in the data.

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Why is it important?

This work is important since it solves the risk-return puzzle.