Equilibrium Underdiversification and the Preference for Skewness

By Todd Mitton, Keith P. Vorkink. 2007

755 citations recorded by the source corpus.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b5e5636753f7ef0ea4634a56fd5f6dadf749ae38

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Citations in the corpus

Extreme Downside Risk and Expected Stock Returns (2012, neutral): “In essence, EDR is an idiosyncratic measure of extreme downside risk, following the spirit of idiosyncratic skewness in Mitton and Vorkink (2007) and Boyer et al. (2010).1 This choice of idiosyncratic measure is motivated by Merton (1987) who suggests that in practice it is very difficult to fully…”
Keynes Meets Markowitz: The Tradeoff Between Familiarity and Diversification (2009, neutral): “…stocks (Merton, 1987), investors’ preference for skewness (Kraus and Litzenberger, 1976; Conine and Tamarkin, 1981; Harvey and Siddique, 2000; Mitton and Vorkink, 2007; Barberis and Huang, 2008), employees’ loyalty toward the company where they work (Cohen, 2009), rank-dependent preferences…”
Improved Estimates of Higher-Order Comoments and Implications for Portfolio Selection (2010, background): “In particular, it has been shown that investors are willing to accept lower expected return and higher volatility compared to the meanvariance benchmark in exchange for higher skewness and lower kurtosis [see Harvey and Siddique (2000), Dittmar (2002), or Mitton and Vorkink (2007)].”
Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns? (2013, background): “Barberis and Huang (2008) and Mitton and Vorkink (2007) develop models in which investors have similar preferences for idiosyncratic skewness.”
Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field (2018, positive): “Relatedly, Polkovnichenko (2005) uses stock return data to calibrate a model and shows that household portfolio underdiversification is consistent with probability weighting.”
Nominal price illusion (2016, background): “Nominal price and option trading Mitton and Vorkink (2007), and Barberis and Huang (2008) incorporate investor preferences for skewness into models explaining stock returns, while Kumar (2009) finds empirical evidence that retail investors prefer stocks with lottery features.”
The Skewness of Commodity Futures Returns (2018, neutral): “selling restrictions (Mitton and Vorkink, 2007) or because positive skewness has a valuable impact on the utility investors derive from their investments (Barberis and Huang, 2008).”
Does Mandatory IFRS Adoption Affect Crash Risk (2015, neutral): “3 Left tail risk is also important if idiosyncratic return skewness is a priced component of stock returns, as suggested by some theoretical and empirical research (Brunnermeier et al., 2007; Mitton and Vorkink, 2007; Barberis and Huang, 2008; Boyer et al., 2010; Conrad et al., 2013).”
Behavioral Biases of Mutual Fund Investors (2011, positive): “This is consistent with models (Mitton and Vorkink, 2007; Barberis and Huang, 20008) in which some investors take undiversified positions in skewed securities which appeal to their preferences.”