Is no news still good news? Volatility feedback revisited

Jędrzej Białkowski, Sanghyun Hong and Moritz Wagner

Pacific-Basin Finance Journal, 2025, vol. 91, issue C

Abstract: In this paper, we examine the volatility feedback effect by replicating and extending Campbell and Hentschel (CH, 1992). Consistent with CH, we find that volatility feedback is present in the U.S. equity market and has become more pronounced in recent times. The estimated effect is between two to three times larger in the extended sample period compared to earlier periods. When we expand the analysis to Australia and New Zealand, we find similar results for the former and weaker results for the latter market. Overall, the results highlight the importance of volatility feedback for analysing the risk-return relationship.

Keywords: Volatility feedback; Return asymmetry; Risk-return trade-off (search for similar items in EconPapers)
JEL-codes: C58 G10 G12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000459

DOI: 10.1016/j.pacfin.2025.102708

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