Expected Skewness and Momentum

64 Pages Posted: 19 May 2015

See all articles by Heiko Jacobs

Heiko Jacobs

University of Duisburg-Essen, Campus Essen

Tobias Regele

Allianz SE - Allianz Global Investors Europe

Martin Weber

University of Mannheim - Department of Banking and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 2015

Abstract

Motivated by the time-series insights of Daniel and Moskowitz (2014), we investigate the link between expected skewness and momentum in the cross-section. The three factor alpha of skewness-enhanced (-weakened) momentum strategies is about twice (half) as large as the traditional momentum alpha. In fact, skewness is among the most important cross-sectional determinants of momentum. Our findings do not neatly fit within a specific prominent theory of momentum. Due to the simplicity of the approach, its economic magnitude, and its existence among large stocks and in the recent past, the results appear difficult to reconcile with the efficient market hypothesis.

Keywords: behavioral finance, market efficiency, momentum, return predictability, skewness

JEL Classification: G12, G14

Suggested Citation

Jacobs, Heiko and Regele, Tobias and Weber, Martin, Expected Skewness and Momentum (May 2015). CEPR Discussion Paper No. DP10601. Available at SSRN: https://ssrn.com/abstract=2608059

Heiko Jacobs (Contact Author)

University of Duisburg-Essen, Campus Essen ( email )

Universitätsstr. 9
Essen, 45141
Germany
+49-(0)621-181-3453 (Phone)
+49-(0)621-181-1534 (Fax)

HOME PAGE: http://sites.google.com/site/heikojacobsfinance/

Tobias Regele

Allianz SE - Allianz Global Investors Europe

Bockenheimer Landstrasse 42-44
Frankfurt am Main, 60323
Germany

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

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