Asymmetric Relationships and the Cross Section of Stock Returns

Sammanfattning: This thesis consists of two different papers within the field of Asset Pricing, which study asymmetric relationships in the Cross-Section of Stock Returns: "State Dependence of Macroeconomic Announcement Betas and the Cross-Section of Stock Returns" and "Idiosyncratic Higher Order Moments in the Cross-Section of Stock Returns". In the first paper I examine the relationship between macroeconomic data releases and stock prices. Using an Event Study approach and regressing individual stock returns on an estimate for the unexpected component of different macroeconomic announcements, I find that stocks do not show a significant reaction to unexpected announcement values on average. The average reaction is however statistically different from 0. Moreover the reaction is highly dependent on the state of the economy. In the second paper I examine the relationship between the idiosyncratic higher order moments, skewness and kurtosis, and mean returns. I do a number of different sorting procedures where I sort stock according to their estimated skewness and kurtosis. I find that a portfolio consisting of stocks with higher idiosyncratic skewness has a higher mean return. This pattern is monotonic through the sorted portfolios and robust to controlling for other variables by double- and triple-sorting.