{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2025,10,11]],"date-time":"2025-10-11T00:46:41Z","timestamp":1760143601102,"version":"build-2065373602"},"reference-count":46,"publisher":"MDPI AG","issue":"2","license":[{"start":{"date-parts":[[2024,2,6]],"date-time":"2024-02-06T00:00:00Z","timestamp":1707177600000},"content-version":"vor","delay-in-days":0,"URL":"https:\/\/creativecommons.org\/licenses\/by\/4.0\/"}],"funder":[{"name":"FAPESP (Funda\u00e7\u00e3o de Amparo \u00e0 Pesquisa do Estado de S\u00e3o Paulo)","award":["2023\/02538-0"],"award-info":[{"award-number":["2023\/02538-0"]}]}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":["Entropy"],"abstract":"<jats:p>This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to overparameterization. Our proposed approach mitigates this concern by leveraging sparsity-inducing priors to automatically select the skewness parameter as dynamic, static or zero in a data-driven framework. We consider two empirical applications. First, in a bond yield application, dynamic skewness captures interest rate cycles of monetary easing and tightening and is partially explained by central banks\u2019 mandates. In a currency modeling framework, our model indicates no skewness in the carry factor after accounting for stochastic volatility. This supports the idea of carry crashes resulting from volatility surges instead of dynamic skewness.<\/jats:p>","DOI":"10.3390\/e26020142","type":"journal-article","created":{"date-parts":[[2024,2,6]],"date-time":"2024-02-06T03:22:31Z","timestamp":1707189751000},"page":"142","update-policy":"https:\/\/doi.org\/10.3390\/mdpi_crossmark_policy","source":"Crossref","is-referenced-by-count":0,"title":["Stochastic Volatility Models with Skewness Selection"],"prefix":"10.3390","volume":"26","author":[{"given":"Igor","family":"Martins","sequence":"first","affiliation":[{"name":"Insper Institute of Education and Research, Rua Quat\u00e1 300, S\u00e3o Paulo 04546-042, Brazil"}]},{"given":"Hedibert","family":"Freitas Lopes","sequence":"additional","affiliation":[{"name":"Insper Institute of Education and Research, Rua Quat\u00e1 300, S\u00e3o Paulo 04546-042, Brazil"}]}],"member":"1968","published-online":{"date-parts":[[2024,2,6]]},"reference":[{"key":"ref_1","first-page":"77","article-title":"Portfolio selection","volume":"7","author":"Markowitz","year":"1952","journal-title":"J. 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