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Skewness sentiment and market anomalies
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Kumar, Alok, Motahari, Mehrshad and Taffler, Richard (2023) Skewness sentiment and market anomalies. Management Science . doi:10.1287/mnsc.2023.4898 ISSN 0025-1909. (In Press)
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Official URL: https://doi.org/10.1287/mnsc.2023.4898
Abstract
This study demonstrate that skewness preference of investors is an important driver of various market anomalies. Using a combined measure of mispricing based on 11 prominent anomaly strategies, we show that return predictability associated with the mispricing component of market anomalies is stronger among firms with higher idiosyncratic skewness. The predictability differences are driven by the higher underperformance of high skewness firms in Short anomaly portfolios. Skewness does not affect the performance of Long anomaly portfolios. Portfolio holdings data from a retail brokerage firm show that investors with stronger skewness preference assign relatively larger weights to stocks in Short anomaly portfolios.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HG Finance | ||||||
Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||
Library of Congress Subject Headings (LCSH): | Stock exchanges -- Prices, Investment analysis, Investments -- Decision making | ||||||
Journal or Publication Title: | Management Science | ||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||
ISSN: | 0025-1909 | ||||||
Official Date: | 29 August 2023 | ||||||
Dates: |
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DOI: | 10.1287/mnsc.2023.4898 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | In Press | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 7 February 2023 | ||||||
Date of first compliant Open Access: | 8 February 2023 | ||||||
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