The Role of Realized Volatility in the Athens Stock Exchange

Dimitrios Thomakos and Michail Koubouros

No 20, Working Papers from University of Peloponnese, Department of Economics

Abstract: Using a newly developed dataset of daily, value-weighted market returns we construct and analyze the monthly realized volatility of the Athens Stock Exchange (A.S.E.) from 1985 to 2003. Our analysis focuses on the distributional and time series properties of the realized volatility series and on assessing the connection between realized volatility and returns through an multi-factor asset pricing model. In particular, we finnd strong evidence on the existence of a volatility feedback e¤ect and the leverage e¤ect, and on the existence of asymmetries between lagged returns and volatility. Furthermore, we examine the cross-sectional distribution of unconditional loadings on the realized risk factor(s) for different sets of characteristics-sorted common stock portfolios. We find that realized risk is a significantly priced factor in A.S.E. and its high explanatory power for the cross-section of portfolio average returns is independent of any return variation related to the market (CAPM) or size and book-to-market (Fama-French) factors. We discuss our findings in the context of the recent literature on realized volatility and feedback effects, as well as the literature on the pricing power of realized risk.

Keywords: realized volatility; leverage e¤ect; volatility feedback e¤ect; asset pricing; A.S.E. (search for similar items in EconPapers)
Pages: 35 pages
Date: 2008
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Related works:
Journal Article: The Role of Realised Volatility in the Athens Stock Exchange (2011)
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