Skewness Expectations and Portfolio Choice

79 Pages Posted: 18 Jul 2016 Last revised: 4 Apr 2018

See all articles by Tilman H. Drerup

Tilman H. Drerup

University of Bonn

Matthias Wibral

Maastricht University, School of Business and Economics; IZA Institute of Labor Economics

Date Written: March 30, 2018

Abstract

Many models of investor behavior predict that investors prefer assets with positively skewed return distributions. We provide a direct test of this prediction in a representative sample of the Dutch population. Using detailed data on subjective return expectations for different assets, we first document that individuals entertain highly heterogeneous expectations and that these differ substantially from historical values. We then link this heterogeneity to investments in portfolio choice experiments. Consistent with theoretical predictions, individuals who expect higher skewness for an asset invest more into that asset.

Keywords: Skewness, Portfolio Choice, Stock Market Expectations

JEL Classification: G02, G11

Suggested Citation

Drerup, Tilman H. and Wibral, Matthias, Skewness Expectations and Portfolio Choice (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=2810940 or http://dx.doi.org/10.2139/ssrn.2810940

Tilman H. Drerup (Contact Author)

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Matthias Wibral

Maastricht University, School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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