29 Pages Posted: 12 Jan 2009 Last revised: 1 Feb 2016
Date Written: 2015
Much of traditional asset pricing theory rests on the assumption of normality in the distribution of stock returns. A growing body of research suggests that skewness in the return distributions can affect asset prices. This paper attempts to empirically identify factors that influence return skewness. Consistent with theory in Xu (2007), we find that prices during the post-earnings announcement period are more convex for firms that have tighter short-sale constraints and for firms where there appears to be greater disagreement among investors. Perhaps more importantly, we also find that price convexity is a key determinant in the skewness of stocks.
Keywords: skewness, earnings announcements, short sale constraints
Suggested Citation: Suggested Citation
Blau, Benjamin M. and Pinegar, J. Michael and Whitby, Ryan J., Skewness and the Asymmetry in Earnings Announcement Returns (2015). Journal of Financial Research, Vol. Summer, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=1325551 or http://dx.doi.org/10.2139/ssrn.1325551
By Eli Ofek