Skewness of Funds – Friend or Foe?

It’s complicated.

May 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.

  • Some funds exhibit strong skewness profiles
  • Skewness is highly time-varying and not necessarily a negative criteria
  • Should be measured but unlikely managed


The trouble with investing in emerging markets is that they are quite different, which requires extensive due diligence on each of them, and they also can change quickly. For example, take Argentina versus China. The former has been mismanaged for decades, while the latter has been managed exceptionally well for the size of the country, lifting close to a billion people out of poverty.

However, China changed its policy over the last two years and started turning inwards, while Argentina’s citizens elected a reform-minded president who gives investors hope for a reversal of fortunes. Although stock markets often do not reflect economic growth, in this case, the Argentinian stock market has started outperforming the Chinese one (read Myth-Busting: The Economy Drives the Stock Market).

The volatility of both markets is comparable, but their skewness is not. The Chinese stock market features a skewness of +0.45 versus -0.96 for the Argentinian market over the last 13 years. Should this trouble investors?

In this article, we will explore the skewness of funds.


We focus on ETFs trading in the U.S. that have at least 10 years of track record, which is a universe of approximately 1,000 funds, and compute their skewness using daily returns for the decade between 2014 and 2024 (read Skewness as a Factor).

Reviewing the top 10 most positively skewed ETFs highlights a diverse range of products providing exposure to currencies, bonds, and volatility. The VIX products are perhaps the most intuitive instruments for thinking about positive skewness as the VIX tends to mostly decline but then occasionally explode upwards when something happens that could have adverse effects on the economy and stock market.

In contrast, the top 10 most negatively skewed products a