Advanced Search
MyIDEAS: Login

Do Realized Skewness and Kurtosis Predict the Cross-Section of Equity Returns?

Contents:

Author Info

  • Diego Amaya

    ()
    (HEC Montreal - Department of Management Sciences)

  • Peter Christoffersen

    ()
    (University of Toronto - Rotman School of Management and CREATES)

  • Kris Jacobs

    ()
    (University of Houston - C.T. Bauer College of Business)

  • Aurelio Vasquez

    ()
    (Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration)

Abstract

Yes. We use intraday data to compute weekly realized variance, skewness and kurtosis for individual equities and assess whether this week?s realized moments predict next week?s stock returns in the cross-section. We sort stocks each week according to their past realized moments, form decile portfolios and analyze subsequent weekly returns. We ?nd a very strong negative relationship between realized skewness and next week?s stock returns, and a positive relationship between realized kurtosis and next week?s stock returns. We do not ?nd a strong relationship between realized volatility and stock returns. A trading strategy that buys stocks in the lowest realized skewness decile and sells stocks in the highest realized skewness decile generates an average weekly return of 43 basis points with a t-statistic of 8:91. A similar strategy that buys stocks with high realized kurtosis and sells stocks with low realized kurtosis produces a weekly return of 16 basis points with a t-statistic of 2:98. Our results are robust across sample periods, portfolio weightings, and proxies for ?rm characteristics, and they are not captured by the Fama-French and Carhart factors.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ftp.econ.au.dk/creates/rp/11/rp11_44.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2011-44.

as in new window
Length: 44
Date of creation: 29 Jul 2011
Date of revision:
Handle: RePEc:aah:create:2011-44

Contact details of provider:
Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Realized volatility; skewness; kurtosis; equity markets; return prediction.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aah:create:2011-44. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.