 Asymmetric tail dependence between stock market returns and implied volatilityKrzysztof Echaust The Journal of Economic Asymmetries, 2021, vol. 23, issue C Abstract: The main objective of this paper is to analyze tail dependence between returns and changes in implied volatility. We verify the asymmetry in dependence of positive and negative extreme returns with implied volatility. This empirical study is based on 678 series of options listed on the Warsaw Stock Exchange, in Poland during the period 2007 to 2018. We use a copula methodology and a nonparametric asymptotic dependence approach to estimate tail dependence. We find that changes in implied volatility are asymptotically independent on positive extreme returns and significantly dependent on negative extreme returns. The same asymmetry we obtained for call and put options regardless of their moneyness. The empirical evidence also suggests that implied volatility of put options rise more than that for call options in crash times and falls deeper in times of low volatility. Keywords: Asymmetry; Tail dependence; Implied volatility; Extreme returns; Copula (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:23:y:2021:i:c:s1703494920300372 DOI: 10.1016/j.jeca.2020.e00190 Access Statistics for this article The Journal of Economic Asymmetries is currently edited by A.G. Malliaris More articles in The Journal of Economic Asymmetries from Elsevier |
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