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Cited by 782

The DOI matches its Crossref record; 39 of the 39 references it cites were found in a registry or an index.

Equilibrium Underdiversification and the Preference for Skewness

Mitton, Todd, Vorkink, Keith·2007·Review of Financial Studies
DOI 10.1093/revfin/hhm011
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Abstract

We develop a one-period model of investor asset holdings where investors have heterogeneous preference for skewness. Introducing heterogeneous preference for skewness allows the model's investors, in equilibrium, to underdiversify. We find support for our model's three key implications using a dataset of 60,000 individual investor accounts. First, we document that the portfolio returns of underdiversified investors are substantially more positively skewed than those of diversified investors. Second, we show that the apparent mean-variance inefficiency of underdiversified investors can be largely explained by the fact that investors sacrifice mean-variance efficiency for higher skewness exposure. Furthermore, we show that idiosyncratic skewness, and not just coskewness, can impact equilibrium prices. Third, the underdiversification of investors does not appear to be coincidentally related to skewness. Stocks most often selected by underdiversified investors have substantially higher average skewness—especially idiosyncratic skewness—than stocks most often selected by diversified investors.

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Metadata

Authors
Mitton, T., & Vorkink, K.
Venue
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Published
2007-01-29
Volume
20
Issue
4
Pages
1255-1288
ISSN
  • 0893-9454 (ISSN-L)
  • 1465-7368
DOI
10.1093/revfin/hhm011
OpenAlex
W3122618988
Cited by
782
References
39
FWCI
41.33
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Equilibrium Underdiversification and the Preference for Skewness. https://app.cochat.ai/papers/10.1093/revfin/hhm011
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Mitton, T., & Vorkink, K. (2007). Equilibrium Underdiversification and the Preference for Skewness. Review of Financial Studies. https://doi.org/10.1093/revfin/hhm011

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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.