Skewness Expectations and Portfolio Choice
79 Pages Posted: 18 Jul 2016 Last revised: 4 Apr 2018
Date Written: March 30, 2018
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: Suggested Citation