The Review of Asset Pricing Studies Vol. 12 No. 1 2022

Cross-Sectional Skewness

Sangmin S Oh¹; Jessica A. Wachter²

¹ Booth School of Business The University of Chicago · ² The Wharton School, University of Pennsylvania

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).

DOI

10.1093/rapstu/raab023

Volume

12

Issue

1

Pages

155-198

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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