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Average skewness matters

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  • Jondeau, Eric
  • Zhang, Qunzi
  • Zhu, Xiaoneng

Abstract

Average skewness, which is the average of monthly skewness values across firms, performs well at predicting future market returns. This prediction still holds after controlling for the size or liquidity of the firms or for current business cycle conditions. Also, average skewness compares favorably with other economic and financial predictors of subsequent market returns. The asset allocation exercise based on predictive regressions also shows that average skewness generates superior performance.

Suggested Citation

  • Jondeau, Eric & Zhang, Qunzi & Zhu, Xiaoneng, 2019. "Average skewness matters," Journal of Financial Economics, Elsevier, vol. 134(1), pages 29-47.
    • Handle: RePEc:eee:jfinec:v:134:y:2019:i:1:p:29-47
    DOI: 10.1016/j.jfineco.2019.03.003
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    More about this item

    Keywords

    Return predictability; Average skewness; Idiosyncratic skewness;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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