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Does realized skewness predict the cross-section of equity returns?

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  • Amaya, Diego
  • Christoffersen, Peter
  • Jacobs, Kris
  • Vasquez, Aurelio

Abstract

We use intraday data to compute weekly realized moments for equity returns and study their time-series and cross-sectional properties. Buying stocks in the lowest realized skewness decile and selling stocks in the highest realized skewness decile generates an average return of 19 basis points the following week with a t-statistic of 3.70. This result is robust across a wide variety of implementations and is not captured by the Fama-French and Carhart factors. The relation between realized kurtosis and next week׳s stock returns is positive but not always significant. We do not find a strong relation between realized volatility and next week׳s stock returns.

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  • Amaya, Diego & Christoffersen, Peter & Jacobs, Kris & Vasquez, Aurelio, 2015. "Does realized skewness predict the cross-section of equity returns?," Journal of Financial Economics, Elsevier, vol. 118(1), pages 135-167.
    • Handle: RePEc:eee:jfinec:v:118:y:2015:i:1:p:135-167
    DOI: 10.1016/j.jfineco.2015.02.009
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    More about this item

    Keywords

    Realized volatility; Skewness; Kurtosis; Equity markets; Cross-section of stock returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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