Review of Finance, 2017, 21, 2169–2197. doi:10.1093/rof/rfw040 It has been brought to our attention that the distribution proposed in “A simple skewed distribution with asset pricing application” (Review of Finance, 2017) is not only a special case of Hansen’s (1994) skewed t distribution, as explained in our paper, but that it has also previously been introduced in other fields.1 The distribution has been known under different names in the literature such as “two-piece normal distribution” and “split normal distribution,” and it was first proposed by the psychologist Carl Gustav Fechner in Fechner (1897). As discussed in Wallis (2014), the distribution has since then been rediscovered in physics, statistics, and meteorology.2 While the contribution of our paper in terms of understanding skewness and its effects on value at risk, expected shortfall, portfolio weights, and asset pricing, and the closed-form parameterization of the distribution in our Appendix B is unaffected by this omission, our distribution is not new and should be correctly attributed to Fechner (1897).

Recent research has identified skewness and downside risk as one of the most important features of risk. We present a new distribution which makes modeling skewed risks no more difficult than normally distributed (symmetric) risks. Our distribution is a combination of the “downside” and “upside” half of two normal distributions, and its parameters can be calculated in closed form to match a given mean, variance, and skewness. Value at risk, expected shortfall, portfolio weights, and risk premia have simple expressions for our distribution and show economically meaningful deviations from the normal case already for very modest levels of skewness. An empirical application suggests that our distribution fits the data well.