On the time‐varying relationship between coskewness and returns of banks

For a sample of US commercial banks, we find that during the Global Financial Crisis 2007–2009 and COVID-19 pandemic February–December 2020, bank returns were positively related to their coskewness with market return, while relationship was negative stable periods. The literature on non-financial firms global equity indices has shown between stock is time-variant. findings this study extend evidence banks. interpretation in normal times, investors show preference for “lotteryness,” therefore they are willing pay premium stocks high (i.e., low expected return). In contrast, crises, more likely suffer deep losses, reluctant demand these risky returns. These deliver important insights into how interpret capital costs throughout business cycle, as suggest crises issuance becomes costly banks because higher risk premiums.