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Title: Skewness in Stock Returns, Periodic Cash Payouts, and Investor Heterogeneity

Author(s): Rui Albuquerque

Publication Date: November 2009

Keyword(s): investor heterogeneity, periodic cash payouts, Skewness and turnover

Programme Area(s): Financial Economics

Abstract: This paper analyzes the asset pricing implications of periodic cash payouts within the context of a stationary rational expectations model with heterogeneous investors. The periodicity of cash payouts provides a natural motivation for time-varying conditional volatility in stock returns. I show that the unconditional distribution of returns is a mixture of normals distribution, which has non-trivial skewness properties. I examine how conditional volatility, trading volume and skewness in stock returns are related to information dispersion and liquidity in the stock market. The model provides a rationale for why firm returns have positive skewness while market returns have negative skewness.

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Bibliographic Reference

Albuquerque, R. 2009. 'Skewness in Stock Returns, Periodic Cash Payouts, and Investor Heterogeneity'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7573