Skewness preference across countries

Adam Zaremba () and Andrzej Nowak

Business and Economic Horizons (BEH), 2015, vol. 11, issue 2, 115-130

Abstract: Prospect theory implies that assets with positively skewed returns should be traded at premium to assets with negative skewness. We hypothesize that in the integrated financial markets this concept should also hold for the entire country equity portfolios. This article examines the linkages between the country-level expected returns and past skewness. We evidence a robust negative relationship between skewness and future returns. The phenomenon is most significant within large, liquid, developed, and open stock markets. Additional sorts on skewness can improve performance of both cross-country value and momentum strategies. The study is based on the sorting and cross-sectional tests conducted within a sample of 78 country equity markets for years 1999-2014.

Keywords: Skewness preference; country-level effects; inter-market effects; asset pricing; international markets (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://academicpublishingplatforms.com/downloads/ ... tries_pp.115-130.pdf
https://academicpublishingplatforms.com/article.ph ... mber=18&article=2190 (text/html)

Related works:
Journal Article: Skewness preference across countries (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pdc:jrnbeh:v:11:y:2015:i:2:p:115-130

Access Statistics for this article

Business and Economic Horizons (BEH) is currently edited by Orifjan Namozov, Ph.D.

More articles in Business and Economic Horizons (BEH) from Prague Development Center Contact information at EDIRC.
Bibliographic data for series maintained by Jaroslav Holecek ( this e-mail address is bad, please contact ).