Leverage Effect and Volatility Asymmetry

Parthajit Kayal () and S. Maheswaran
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Parthajit Kayal: Madras School of Economics
S. Maheswaran: Institute for Financial Management and Research

Chapter Chapter 9 in Current Issues in the Economy and Finance of India, 2018, pp 131-150 from Springer

Abstract: Abstract The leverage effectLeverage effect , the relationship between asset volatilityVolatility and returns is generally examined at contemporaneous or inter-temporal level. Instead, this paper examines the leverage effectLeverage effect over a period by classifying days into positive-return and negative-return days. We also examine the volatility asymmetryVolatility asymmetry in leverage effectLeverage effect by decomposing the volatilityVolatility into up and down volatilities. This paper makes use of extreme value estimatorsExtreme Value Estimators to examine 14 indices from different Emerging economies and 10 indices from developed economies. We document that the evidence of a negative relationship between volatilityVolatility and returns is more prevalent in developed markets. This study also observes a dominance of down volatility Volatility over up volatility Volatility during negative-return days.

Keywords: Leverage effect; Volatility asymmetry; Extreme value estimators (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-99555-7_9

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DOI: 10.1007/978-3-319-99555-7_9

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