Expected Idiosyncratic Skewness

Posted: 25 Jan 2010

See all articles by Brian Boyer

Brian Boyer

Brigham Young University

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

Date Written: June 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.

Keywords: D03, G11, G12

Suggested Citation

Boyer, Brian and Mitton, Todd and Vorkink, Keith, Expected Idiosyncratic Skewness (June 2009). The Review of Financial Studies, Vol. 23, Issue 1, pp. 169-202, 2009. Available at SSRN: https://ssrn.com/abstract=1541002 or http://dx.doi.org/hhp041

Brian Boyer

Brigham Young University ( 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

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

Provo, UT 84602
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,916
PlumX Metrics