Skewness Expectations and Portfolio Choice

91 Pages Posted: 18 Jul 2016 Last revised: 5 Oct 2022

See all articles by Tilman H. Drerup

Tilman H. Drerup

Instacart

Matthias Wibral

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

Christian Zimpelmann

IZA

Multiple version iconThere are 2 versions of this paper

Date Written: September 28, 2022

Abstract

Many models of investor behavior predict that investors prefer assets that they believe to have positively skewed return distributions. We elicit detailed return expectations for a broad index fund and a single stock in a representative sample of the Dutch population. The data show substantial heterogeneity in individuals’ skewness expectations of which only very little is captured by sociodemographics. Across assets, most respondents expect a higher variance and skewness for the individual stock compared to the index fund. Portfolio allocations increase with the skewness of respondents’ return expectations for the respective asset, controlling for other moments of a respondent’s expectations.

Keywords: Stock Market Expectations, Skewness, Portfolio Choice, Behavioral Finance

JEL Classification: G02, G11

Suggested Citation

Drerup, Tilman H. and Wibral, Matthias and Wibral, Matthias and Zimpelmann, Christian, Skewness Expectations and Portfolio Choice (September 28, 2022). Available at SSRN: https://ssrn.com/abstract=2810940 or http://dx.doi.org/10.2139/ssrn.2810940

Tilman H. Drerup

Instacart

United States

Matthias Wibral (Contact Author)

IZA Institute of Labor Economics

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

Maastricht University, School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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