Stock Return Asymmetry: Beyond Skewness

45 Pages Posted: 16 Sep 2015 Last revised: 20 Apr 2018

See all articles by Lei Jiang

Lei Jiang

Tsinghua University

Ke Wu

Renmin University of China

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School; China Academy of Financial Research (CAFR)

Yifeng Zhu

School of Finance, Central University of Finance and Economics

Date Written: April 11, 2018

Abstract

In this paper, we propose two asymmetry measures for stock returns. Unlike the popular skewness measure, our measures are based on the distribution function of the data rather than just the third central moment. We present empirical evidence that greater upside asymmetries calculated using our new measures imply lower average returns in the cross-section of stocks. In contrast, when using the skewness measure, the relationship between asymmetry and returns is inconclusive.

Keywords: Stock return asymmetry, entropy, asset pricing

JEL Classification: G11, G17, G12

Suggested Citation

Jiang, Lei and Wu, Ke and Zhou, Guofu and Zhu, Yifeng, Stock Return Asymmetry: Beyond Skewness (April 11, 2018). Available at SSRN: https://ssrn.com/abstract=2660598 or http://dx.doi.org/10.2139/ssrn.2660598

Lei Jiang

Tsinghua University ( email )

Beijing, 100084
China

Ke Wu

Renmin University of China ( email )

59 Zhongguancun Street
Beijing, 100872
China

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

China Academy of Financial Research (CAFR)

Shanghai Advanced Institute of Finance
Shanghai P.R.China, 200030
China

Yifeng Zhu

School of Finance, Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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