Skewness and Momentum

46 Pages Posted: 17 Aug 2017

See all articles by Yuecheng Jia

Yuecheng Jia

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development

Shu Yan

Oklahoma State University - Stillwater - Department of Finance

Date Written: May 2017

Abstract

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

Jia, Yuecheng and Yan, Shu, Skewness and Momentum (May 2017). Available at SSRN: https://ssrn.com/abstract=3019716 or http://dx.doi.org/10.2139/ssrn.3019716

Yuecheng Jia (Contact Author)

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development ( email )

39 South College Road
Beijing
China

Shu Yan

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States

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