Firm-level political risk and asymmetric volatility
Goodness C. Aye,
Riza Demirer and
The Journal of Economic Asymmetries, 2018, vol. 18, issue C, -
This paper examines whether proxies of political risk exposure at the firm-level can predict the aggregate stock market volatility. Utilizing a nonparametric causality-in-quantiles test which not only guards against misspecification due to nonlinearity, but also tests for causality over the entire conditional distribution of the realized volatilities, we show that political risk exposure can serve as a strong predictor of bad realized volatility, while the causal effects are non-existent in the case of overall and good realized volatilities. Our findings provide novel insight to the well-documented asymmetric volatility puzzle and the effect of political uncertainty on stock market fluctuations via the investor attention channel. The results also suggest that political risk exposure could be a contributing factor to jump risk in the cross-section of returns.
Keywords: Aggregate realized volatility; Firm-level political risk; Quantile causality; S&P 500 (search for similar items in EconPapers)
JEL-codes: C22 G1 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Firm-Level Political Risk and Asymmetric Volatility (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:18:y:2018:i:c:15
Access Statistics for this article
The Journal of Economic Asymmetries is currently edited by A.G. Malliaris
More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().