Discussion paper

DP7573 Skewness in Stock Returns, Periodic Cash Payouts, and Investor Heterogeneity

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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Citation

Albuquerque, R (2009), “DP7573 Skewness in Stock Returns, Periodic Cash Payouts, and Investor Heterogeneity”, CEPR Press Discussion Paper No. 7573. https://cepr.org/publications/dp7573