This analysis is based on Bali, T., N. Cakici and R. Whitelaw, 2011, Maxing out: Stocks as lotteries and the cross-section of expected returns, Journal of Financial Economics 99, 427–446.
Bali, Cakici and Whitelaw (2011) (henceforth BCW) find that there is a negative and significant relation between stocks’ maximum daily returns over the past month (MAX) and their returns over the following month. Subsequent return differences between stocks in the highest and the lowest MAX deciles (high-minus-low) exceed -1% per month.Published on Oct 21, 2018 by QuantStudium Team. Category: Market Efficiency
This analysis is based on Jia, Y. and S. Yan, 2017, Profitability skewness and stock returns, Working Paper, Oklahoma State University.
Jia and Yan (2017) find that there is a positive and significant relation between profitability skewness and future stock returns, robust to alternative firm profitability proxies. The positive return predictability holds up to a year. Depending on the firm profitability measure employed by the authors, subsequent unadjusted return differences between stocks in the highest and the lowest profitability skewness deciles (high-minus-low) range from 1.93% to 2.59% per quarter. Overall, all portfolio returns, regardless of risk adjustment or weighting scheme, increase significantly with profitability skewness.Published on Sep 13, 2018 by QuantStudium team. Category: Market Efficiency
This analysis is based on Jia,Y. and S. Yan, 2017, Skewness and momentum, Working paper, Oklahoma State University.
Jia and Yan (2017) find that momentum profits of individual stocks decrease with skewness while momentum profits for industry portfolios increase with skewness. In our analysis we focus on the individual stock results. Depending on whether expected return skewness is computed from past stock return data or implied from options data, return differences between stocks in the highest and lowest momentum deciles range from 4.6% to 5.9% over the next six months for stocks in the lowest skewness quintile while they are less than 1% in the highest skewness quintile.Published on Sep 13, 2018 by QuantStudium team. Category: Market Efficiency
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