Do negative and positive equity returns share the same volatility dynamics?

Alessandro Palandri ()

Journal of Banking & Finance, 2015, vol. 58, issue C, 486-505

Abstract: This paper investigates whether positive and negative returns share the same dynamic volatility process. The well established stylized facts on volatility persistence and asymmetric effects are re-examined in light of such dichotomy. To analyze the dynamics of down and up volatilities estimated from daily returns I use a bivariate generalization of the standard EGARCH model. As a robustness check, I also investigate various specifications of down and up realized measures estimated from high-frequency data. The empirical findings point to the existence of a marked diversity in the volatilities of positive and negative daily returns in terms of persistence and sensitivity to good and bad news. A simple forecasting exercise highlights the striking performance of the proposed approach even during the crisis period.

Keywords: Volatility; Contemporaneous asymmetry; GARCH; Realized variation (search for similar items in EconPapers)
JEL-codes: C1 C3 G1 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S037842661500165X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:58:y:2015:i:c:p:486-505

DOI: 10.1016/j.jbankfin.2015.05.017

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().