Market Skewness Risk and the Cross Section of Stock Returns

Bo Young Chang, Peter F. Christoffersen, Kris Jacobs

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstract

The cross section of stock returns has substantial exposure to risk captured by higher moments of market returns. We estimate these moments from daily Standard & Poor's 500 index option data. The resulting time series of factors are genuinely conditional and forward-looking. Stocks with high exposure to innovations in implied market skewness exhibit low returns on average. The results are robust to various permutations of the empirical setup. The market skewness risk premium is statistically and economically significant and cannot be explained by other common risk factors such as the market excess return or the size, book-to-market, momentum, and market volatility factors, or by firm characteristics.
OriginalsprogEngelsk
TidsskriftJournal of Financial Economics
Vol/bind107
Udgave nummer1
Sider (fra-til)46-68
ISSN0304-405X
DOI
StatusUdgivet - jan. 2013

Citationsformater