Conditional heteroskedasticity, skewness and leverage effects are well‐known features of financial returns. The literature on factor models has often made assumptions that preclude the three effects to occur simultaneously. In this paper I propose a conditionally heteroskedastic factor model that takes into account the presence of both the conditional skewness and leverage effects. This model is specified in terms of conditional moment restrictions and unconditional moment conditions are proposed allowing inference by the generalized method of moments (GMM). The model is also shown to be closed under temporal aggregation. An application to daily excess returns on sectorial indices from the UK stock market provides strong evidence for dynamic conditional skewness and leverage with a sharp efficiency gain resulting from accounting for both effects. The estimated volatilitypersistence from the proposed model is lower than that estimated from models that rule out such effects. I also find that the longer the returns' horizon, the fewer conditionally heteroskedastic factors may be required for suitable modeling and the less strong is the evidence for dynamic leverage. Some of these results are in line with the main findings of Harvey and Siddique (1999) and Jondeau and Rockinger (2003), namely that accounting for conditional skewness impacts the persistence in the conditional variance of the return process. Copyright © 2012 John Wiley & Sons, Ltd.