Abstract
This paper replicates Jondeau et al. (2019) on the topic of average skewness which is the average of monthly skewness values across firms. First, we consistently reproduce their main results and validate that average skewness negatively predicts the next-month U.S. stock market returns. Second, we test the prediction on the Taiwanese stock market where retail investors dominate the trading volume and find that average skewness fails to predict the next-month market returns. Third, we extend our analysis on the Taiwanese stock market to allow for delayed effects and adopt the maximum daily return over the month (MAX) as an alternative measure of skewness. We find that the value-weighted average skewness and the average MAX are able to predict the second-next-month market returns in Taiwan.
•Average skewness predicts next-month U.S. stock market returns.•Average skewness does not predict next-month Taiwanese stock market returns.•Average skewness predicts second-next-month Taiwanese stock market returns.•There exists delayed correction of mispricing in the Taiwanese stock market.•Average MAX performs well in predicting Taiwanese stock market returns.