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arXiv · 2604.07870

Skewness Dispersion and Stock Market Returns

Mykola Babiak·Jozef Barunik·Josef Kurka
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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.

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Mykola Babiak, Jozef Barunik, Josef Kurka. 2026-04-09. Skewness Dispersion and Stock Market Returns. https://arxiv.org/abs/2604.07870

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