Skewness
Do a market's biggest moves tend to land on the upside or the downside, and how can you tell?
In plain words
Skewness describes which side of a typical price change carries the unusually large moves. Positive skew means the rare big jumps are mostly upward; negative skew means the rare big drops are mostly downward. It looks at the shape of the whole distribution of returns, not just its average or its spread.
Why it matters
Two markets can have identical average returns and identical volatility yet pose very different risks. Negative skew means losses arrive in fewer, larger steps than gains, so a stop-loss or position size built from typical moves can be overrun before it acts. Skewness also shapes how a week feels: mostly quiet drift punctuated by a sharp fall reads differently from the reverse.
In a real week: BTC, week of 5 March 2018
In the week of 5 March 2018, BTC fell 17.21% from 11515.0 to 9533.57, with a range of 40.59%. The largest hourly move was -7.21% on Wednesday at 16:00 UTC, and the worst day, 7 March, returned -7.53%, while the best day, 11 March, returned 8.7%. The high, at 20:00 UTC on Monday 5 March, preceded the low, at 06:00 UTC on Friday 9 March. The largest single-hour move was a fall, but the largest single-day move was a rally, so the hourly and daily views of the week's extremes pointed in opposite directions.
A common mistake
Treating skewness as a comparison of the single best and worst day. Skewness weighs the entire distribution of returns, so a week can post a larger best day than worst day and still show downside tail risk in its hourly moves.