Portfolio Size, Portfolio Composition, and the Skewness of Returns

66 Pages Posted: 23 May 2024

See all articles by M. Martin Boyer

M. Martin Boyer

HEC Montreal - Department of Finance

Thomas J. Boyer

HEC Montreal

Abstract

This paper examines the skewness of randomly built equally weighted portfolios constructed between 1990 and 2021. Our results show that portfolios tend to exhibit lower and more negative skewness when they have more assets, and when they contain larger and growth stocks. We explain our results using a model in which investors adjust their perceptions of a security’s value in response to the arrival of public information. Our model predicts that the skewness of a single asset's (resp. portfolio's) return should be positive (resp. negative), and that portfolio skewness should be smaller (and more negative) when composed of larger firms whose fundamental value is more uncertain.

Keywords: Asset returns and portfolio skewness, News arrival, Skewness aggregation, Skewness seasonality, Size and book-to-market portfolios

Suggested Citation

Boyer, M. Martin and Boyer, Thomas J., Portfolio Size, Portfolio Composition, and the Skewness of Returns. Available at SSRN: https://ssrn.com/abstract=4839329 or http://dx.doi.org/10.2139/ssrn.4839329

M. Martin Boyer (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Thomas J. Boyer

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal
Canada

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