EconPapers    
Economics at your fingertips  
 

Time-varying return-volatility relation in international stock markets

Xiaoye Jin

International Review of Economics & Finance, 2017, vol. 51, issue C, 157-173

Abstract: This study examines the time-varying relationship between stock returns and volatility in sixteen stock markets during January 2001 to October 2014. After estimating the volatility process without assuming any specific form of its behavior, we find the volatility to be long-term dependent with the Hurst exponent on a verge of stationarity and nonstationarity. We then apply the detrended cross-correlation coefficient to overcome this complication and find evidence of a significant and negative relationship between current stock market returns and current market volatility. Additionally, we find the strength of the negative return-volatility relation is different for specific scales and is stronger in longer time horizon. We further investigate the presence of volatility feedback and leverage effects in international stock markets by examining the lead-lag relation between stock returns and volatility and confirm that the negative return-volatility relation seems to be return-driven (the leverage effect). Finally, we examine the dynamic behavior of the return-volatility relation by applying a rolling window approach and find that time-varying negative return-volatility relation is more likely to generate an asymmetric response with a greater effect when returns decline, which is the common characteristic of international stock markets.

Keywords: Return-volatility trade-off; Leverage effect; Volatility feedback effect; Time-varying; DCCA (search for similar items in EconPapers)
JEL-codes: C10 C14 G12 G15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056017304094
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:reveco:v:51:y:2017:i:c:p:157-173

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-05-05
Handle: RePEc:eee:reveco:v:51:y:2017:i:c:p:157-173