Skewness Dispersion and Stock Market Returns
Abstract
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is incremental over a broad set of existing predictors, with only a few alternatives retaining independent explanatory ability. Skewness dispersion also delivers substantial economic gains in portfolio allocation. Its forecasting power is concentrated in months with monetary policy announcements, reflecting an information-based mechanism. The empirical evidence suggests that skewness dispersion captures the gradual incorporation of macro news into prices, which is driven by variation in aggregate risk and valuation adjustments.
Cite
@article{arxiv.2604.07870,
title = {Skewness Dispersion and Stock Market Returns},
author = {Mykola Babiak and Jozef Barunik and Josef Kurka},
journal= {arXiv preprint arXiv:2604.07870},
year = {2026}
}