Skewness and Momentum
46 Pages Posted: 17 Aug 2017
Date Written: May 2017
We document two opposite effects of return skewness on momentum profits. For individual stocks, momentum profits decrease with skewness while for industry portfolios, momentum profits increase with skewness. The findings cannot be explained by existing risk factors and stock characteristics. For individual stocks, the evidence is consistent with the behavioral theory of return skewness as well as the skewness preference theory. For industry portfolios, the evidence is consistent with the interpretation of portfolio skewness as a measure of asymmetric inefficiency.
Keywords: Skewness, momentum, stock returns, industry portfolios, options
JEL Classification: G12
Suggested Citation: Suggested Citation