Pricing Implications of Noise

• 成果类型: Article
• 署名作者: Goulding, Christian L.; Santosh, Shrihari; Zhang, Xingtan
• 署名单位: Research Affiliates LLC; University System of Maryland; University of Maryland College Park; University of Colorado System; University of Colorado Boulder
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac082
• 发表日期: 2023
• 页码: 2468
• 关键词: information acquisition; cross-section; preference; equilibrium; skewness; MARKET; RISK; volatility; asymmetry; returns

摘要

We study the interaction between noisy demand and skewed asset payoffs. In our model, price as a function of quantities is convex in a neighborhood around zero if and only if skewness is positive. The combination of convexity and noise produces the idiosyncratic skewness effect, a documented negative relationship between an asset's idiosyncratic skewness and its expected return. We further offer an explanation for the idiosyncratic volatility puzzle. Finally, our theory predicts that higher idiosyncratic skewness strengthens the idiosyncratic volatility effect (and vice versa). We find support for this prediction in the cross-section of stock returns.