Do Realized Skewness and Kurtosis Predict the Cross-Section of Equity Returns?

Yes. We use intraday data to compute weekly realized variance, skewnessand kurtosisfor individual equities and assess whether this week?s realizedmoments predict next week?s stockreturns in the cross-section. We sort stockseach week according to their past realizedmoments, form decileportfolios and analyze subsequent weekly returns. We ?nd a very strong negative relationship between realized skewnessand next week?s stockreturns, and a positive relationship between realized kurtosisand next week?s stockreturns. We do not ?nd a strong relationship between realizedvolatility and stockreturns. A trading strategythat buys stocksin the lowest realized skewness decileand sells stocksin the highest realized skewness decilegenerates an average weekly return of 43 basis pointswith a t-statisticof 8:91. A similar strategy that buys stockswith high realized kurtosisand sells stockswith low realized kurtosisproduces a weekly return of 16 basis pointswith a t-statisticof 2:98. Our results are robust across sample periods, portfolio weightings, and proxies for ?rm characteristics, and they are not captured by the Fama-French and Carhart factors.