On idiosyncratic stochasticity of financial leverage effects

Carles Bretó

Statistics & Probability Letters, 2014, vol. 91, issue C, 20-26

Abstract: We model leverage as stochastic but independent of return shocks and of volatility and perform likelihood-based inference via the recently developed iterated filtering algorithm using S&P500 data, contributing new evidence to the still slim empirical support for random leverage variation.

Keywords: Stochastic leverage; Random-walk time-varying parameter; Non-linear non-Gaussian state-space model; Maximum likelihood estimation; Particle filter (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.spl.2014.04.003

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