Finance Research Seminar: "Retail Investing and the Skewness Premium"
The Finance research group welcomes Dr Jiayu Jin.
She will present her work, entitled "Retail Investing and the Skewness Premium."
About the speaker
Jiayu joined Newcastle University Business School as a Lecturer in Finance in 2024. Prior to this, she completed her PhD and Master's at the University of Manchester. Her research interests lie in empirical asset pricing and financial econometrics, with a current focus on higher moments implied by stochastic volatility models.
Research abstract
We empirically show that retail investors' preference for skewed assets meaningfully affects the skewness premiums of single stocks. To that end, we exploit the profound rise in retail investing over the Covid 19 pandemic.
Using the difference between forward-looking skewness obtained from Aretz et al.’s (2024) novel methodology and risk-neutral skewness obtained from options data to measure skewness premiums, we report that the skewness premium of the average single stock significantly drops at the start of the pandemic. More importantly, we establish that these drops occur only for those stocks which observed the largest increases in their retail holdings.
Our evidence is noteworthy in revealing that retail investors' preferences exert a strong and direct effect on the pricing in stock and options markets.