Is the Distribution of Financial Returns Symmetric? Empirical Evidence from the International Exchange Market

Abstract

The presence of asymmetry in the distribution of financial returns is an important factor that should be considered in optimal portfolio allocation and is also closely related to the recognition and measurement of financial risk. This study adopts a method based on bootstrapping proposed by Lisi (2007) to test asymmetry in the daily return distributions of eight major global exchange rates. The results show that all returns except for the daily return distribution of the CNY/USD rate, which has an evident asymmetry, can be considered symmetric at a high confidence level. In addition, the results also affirm that test methods based on the coefficient of skewness are not suitable for auto-correlative financial return series. This study provides new information relevant to asymmetry evaluation in the marginal distribution of financial time series and the study of the distribution properties of price volatility in the international exchange market.