Influence Of Skewness On The Future Cross-sectional Returns Of Stocks

As an emerging financial market,China's a-share market has many retail investors,information asymmetry,imperfect trading mechanism and inadequate supervision.Moreover,according to the Prospect Theory,investors prefer right-leaning securities.All these problems will lead to the deviation of stock returns from the normal distribution,and there is likely to be an asymmetric distribution of stock returns in China's a-share market.Therefore,it is beneficial for investors to make better use of skewness and make more rational investment decisions,so as to maximize investment returns.This paper constructs the skewness,coskewness and idioskewness of each stock,explores the influence of the three skewness on the future cross-sectional returns of the stock,and analyzes whether the influence of the skewness on stock returns is caused by the coskewness or idioskewness alone,which also explores whether the skewness is caused by the systematic risk or influenced by the corporate trait risk.This paper selects the daily data of China a-share market from June 1,2000 to May 29,2019,and a total of 3,701 listed companies in the past 20 years.The traditional method was used to measure the skewness of a single stock,the system risk component in the CAPM model was used to measure the coskewness,and the fama-french three-factor model was used to measure the idioskewness.On this basis,the measurement time window was extended appropriately to construct the skewness,coskewness and idioskewness of a single stock in 1,3,6 and 12 months.Portfolio analysis and fama-macbeth regression analysis were used to study the influence of skewness on future cross-sectional returns of stocks.The results show that :(1)The distribution of stock returns in China's a-share market is indeed skewed,and investors should face up to the bias.(2)Skewness,coskewness and idioskewness of a single stock are all negatively correlated with cross-sectional returns.(3)After controlling the beta coefficient of system risk,the negative relationship between coskewness and stock returns disappeared,while theidioskewness still existed,indicating that the information captured by the coskewness captures the information reflected by the system risk.(4)There is size effect in China's a-share market.After removing the influence of size,investors still prefer stocks with right distribution of returns.(5)The influence of skewness on cross-sectional returns is formed by the co-skewness and idioskewness.(6)Extending the measurement window period of skewness will not capture more information between skewness and cross-sectional returns of stocks.