One of the chief concerns when making capital budgeting decisions is an accurate measure of risk in a particular investment. In this paper we seek to better refine our understanding of an investment's risk by evaluating the forward looking derivatives associated with it. Specifically we are observing higher moments of the implied distribution at a given expatriation and comparing the marginal change of skewness over time with forward looking performance and volatility. This is done by calculating empirical skewness on out of the money options premiums, which are viewed as market expectations of given returns. An analysis of this methodology shows promising results in the informational content of skewness momentum in terms of predictive modeling. Analysis of 2009-10 data was conducted on six securities that represent many asset classes and sectors of the financial markets. Upon examination of the data, changes in skewness were positively correlated with future returns, but not at a significant level. Additionally, strategies based on skewness information failed to outperform a buy and hold strategy over the period of consideration. Despite these results, the data is encouraging and there are indications that changes in empirical skewness could be utilized effectively in studies of different time periods and methodologies.
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