Abstract
This paper shows that the premium for systematic skewness in individual stocks is positive on average, has negative realized systematic skewness, and is time varying. When skewness preference is high rather than low, the risk premium is 4% higher. Systematic skewness also has significant explanatory power for returns when controlling for most firm characteristics except size and momentum. Size and momentum risk premia, however, do not improve the investment opportunity set of skewness investors. Taken together, these results strengthen the case for skewness preference as an important determinant of stock returns and reconcile previously documented conflicting evidence.
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