Cross-Sectional Skewness

Endogenous information flows and the clustering of announcements

Sangmin S Oh and Jessica A Wachter

The Review of Asset Pricing Studies, 2022, vol. 12, issue 1, 155-198

Abstract: What distribution best characterizes the time series and cross-section of individual stock returns? To answer this question, we estimate the degree of cross-sectional return skewness relative to a benchmark that nests many models considered in the literature. We find that cross-sectional skewness in monthly returns far exceeds what this benchmark model predicts. However, cross-sectional skewness in long-run returns in the data is substantially below what the model predicts. We show that fat-tailed idiosyncratic events appear to be necessary to explain skewness in the data. (JEL, G10, G11, G12, G13, G14).

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:12:y:2022:i:1:p:155-198.

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