Stochastic leverage effect in high-frequency data: a Fourier based analysis

Imma Valentina Curato and Simona Sanfelici

Econometrics and Statistics, 2022, vol. 23, issue C, 53-82

Abstract: The stochastic leverage effect, defined as the standardized covariation between the returns and their related volatility, is analyzed in a stochastic volatility model set-up. A novel estimator of the effect is defined using a pre-estimation of the Fourier coefficients of the return and the volatility processes. The consistency of the estimator is proven. Moreover, its finite sample properties are studied in the presence of microstructure noise effects. The Fourier methodology is applied to S&P500 futures prices to investigate the magnitude of the stochastic leverage effect detectable at high-frequency.

Keywords: Fourier analysis; leverage effect; high-frequency data; microstructure noise (search for similar items in EconPapers)
JEL-codes: C13 C14 C51 C58 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosta:v:23:y:2022:i:c:p:53-82

DOI: 10.1016/j.ecosta.2021.03.001

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