Average Skewness in Global Equity Markets
International Review of Finance, forthcoming
48 Pages Posted: 20 Oct 2020 Last revised: 19 Sep 2022
Date Written: September 24, 2020
This paper examines the predictive power of average skewness, defined as the average of monthly skewness values across stocks, documented by Jondeau et al. (2019, JFE) for US market returns in an international setting. First, we confirm the validity of the results in the original study and show that the intertemporal relation between average skewness and aggregate returns becomes weaker in an alternative sample period. Second, when we repeat the analysis in 22 developed non-US markets, we find that average skewness has no robust predictive power for future market returns. The loss of forecasting power in the international sample does not depend on the method used to calculate average skewness or the regression specification and is supported by additional out-of-sample tests and subsample analysis.
Keywords: equity returns, average skewness, market skewness, volatility, time-series predictability, international finance
JEL Classification: G11, G12, G15
Suggested Citation: Suggested Citation