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Skewness and the Asymmetry in Earnings Announcement Returns

29 Pages Posted: 12 Jan 2009 Last revised: 1 Feb 2016

Benjamin M. Blau

Utah State University - Huntsman School of Business

J. Michael Pinegar

Brigham Young University - Marriott School of Management

Ryan J. Whitby

Utah State University - Huntsman School of Business

Date Written: 2015

Abstract

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

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

Benjamin M. Blau (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

J. Michael Pinegar

Brigham Young University - Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-3088 (Phone)
801-422-0108 (Fax)

Ryan J. Whitby

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435.797.9495 (Phone)

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