Skewness Dispersion and Stock Market Returns
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2026
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| _version_ | 1866914461212737536 |
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| author | Babiak, Mykola Barunik, Jozef Kurka, Josef |
| author_facet | Babiak, Mykola Barunik, Jozef Kurka, Josef |
| contents | Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is incremental over a broad set of existing predictors, with only a few alternatives retaining independent explanatory ability. Skewness dispersion also delivers substantial economic gains in portfolio allocation. Its forecasting power is concentrated in months with monetary policy announcements, reflecting an information-based mechanism. The empirical evidence suggests that skewness dispersion captures the gradual incorporation of macro news into prices, which is driven by variation in aggregate risk and valuation adjustments. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2604_07870 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Skewness Dispersion and Stock Market Returns Babiak, Mykola Barunik, Jozef Kurka, Josef General Finance Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is incremental over a broad set of existing predictors, with only a few alternatives retaining independent explanatory ability. Skewness dispersion also delivers substantial economic gains in portfolio allocation. Its forecasting power is concentrated in months with monetary policy announcements, reflecting an information-based mechanism. The empirical evidence suggests that skewness dispersion captures the gradual incorporation of macro news into prices, which is driven by variation in aggregate risk and valuation adjustments. |
| title | Skewness Dispersion and Stock Market Returns |
| topic | General Finance |
| url | https://arxiv.org/abs/2604.07870 |