City Research Online

Skewness Sentiment and Market Anomalies

Kumar, A., Motahari, M. ORCID: 0000-0003-3245-8545 & Taffler, R. J. (2023). Skewness Sentiment and Market Anomalies. Management Science, 70(7), pp. 4328-4356. doi: 10.1287/mnsc.2023.4898

Abstract

This study demonstrates 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 preferences assign relatively larger weights to stocks in short anomaly portfolios.

Publication Type: Article
Publisher Keywords: Market anomalies, skewness preference, mispricing, idiosyncratic skewness, investor sentiment
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
SWORD Depositor:
[thumbnail of Skewness_Preference_and_Market_Anomalies.pdf]
Preview
Text - Accepted Version
Download (407kB) | Preview

Export

Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login