Testing for Leverage Effects in the Returns of US Equities

Christophe Chorro (), Dominique Guegan (), Florian Ielpo and Hanjarivo Lalaharison
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Christophe Chorro: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This article questions the empirical usefulness of leverage effects to describe the dynamics of equity returns. Relying on both in and out of sample tests we consistently find a weak contribution of leverage effects over the past 25 years of S&P 500 returns. The skewness in the conditional distribution of the returns's time series models in found to explain most of the returns' distribution's asymmetry. This conclusion holds both at the index level and for 70% of the individual stocks constituents of the equity index.

Keywords: Asymmetry; GARCH; Mixture of Gaussian distributions; Generalized hyperbolic distributions; S&P 500; Leverage effect (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-fmk and nep-for
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00973922v2
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Published in 2017

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Related works:
Journal Article: Testing for leverage effects in the returns of US equities (2018)
Working Paper: Testing for leverage effects in the returns of US equities (2018)
Working Paper: Testing for Leverage Effects in the Returns of US Equities (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00973922

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