Abstract

http://ssrn.com/abstract=1089071
 
 

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Expected Idiosyncratic Skewness


Brian H. Boyer


Brigham Young University - J. Willard and Alice S. Marriott School of Management

Todd Mitton


Brigham Young University - J. Willard and Alice S. Marriott School of Management

Keith Vorkink


Brigham Young University - J. Willard and Alice S. Marriott School of Management

March 11, 2009


Abstract:     
We test the prediction of recent theories that stocks with high idiosyncratic skewness should have low expected returns. Because lagged skewness alone does not adequately forecast skewness, we estimate a cross-sectional model of expected skewness that uses additional predictive variables. Consistent with recent theories, we find that expected idiosyncratic skewness and returns are negatively correlated. Specifically, the Fama-French alpha of a low-expected-skewness quintile exceeds the alpha of a high-expected-skewness quintile by 1.00% per month. Furthermore, the coefficients on expected skewness in Fama-MacBeth cross-sectional regressions are negative and significant. In addition, we find that expected skewness helps explain the phenomenon that stocks with high idiosyncratic volatility have low expected returns.

Number of Pages in PDF File: 54

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Date posted: February 4, 2008 ; Last revised: May 17, 2011

Suggested Citation

Boyer, Brian H. and Mitton, Todd and Vorkink, Keith, Expected Idiosyncratic Skewness (March 11, 2009). Available at SSRN: http://ssrn.com/abstract=1089071 or http://dx.doi.org/10.2139/ssrn.1089071

Contact Information

Brian H. Boyer
Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )
Provo, UT 84602
United States
Todd Mitton
Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )
Provo, UT 84602
United States
801-422-1763 (Phone)
Keith Vorkink (Contact Author)
Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )
Provo, UT 84602
United States
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