Skewness in Stock Returns, Periodic Cash Payouts, and Investor Heterogeneity

Rui Albuquerque

No 7573, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyzes the asset pricing implications of periodic cash payouts within the context of a stationary rational expectations model with heterogeneous investors. The periodicity of cash payouts provides a natural motivation for time-varying conditional volatility in stock returns. I show that the unconditional distribution of returns is a mixture of normals distribution, which has non-trivial skewness properties. I examine how conditional volatility, trading volume and skewness in stock returns are related to information dispersion and liquidity in the stock market. The model provides a rationale for why firm returns have positive skewness while market returns have negative skewness.

Keywords: Investor heterogeneity; Periodic cash payouts; Skewness; Turnover (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-fmk
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