Is Unlevered Firm Volatility Asymmetric?

Hazem Daouk and David Ng ()

No 51182, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: Asymmetric volatility refers to the stylized fact that stock volatility is negatively correlated to stock returns. Traditionally, this phenomenon has been explained by the financial leverage effect. This explanation has recently been challenged in favor of a risk premium based explanation. We develop a new, unlevering approach to document how well financial leverage, rather than size, beta, book-to-market, or operating leverage, explains volatility asymmetry on a firm-by-firm basis. Our results reveal that, at the firm level, financial leverage explains much of the volatility asymmetry. This result is robust to different unlevering methodologies, samples, and measurement intervals. However, we find that financial leverage does not explain index-level volatility asymmetry, which is consistent with theoretical results in Aydemir, Gallmeyer and Hollifield (2006).

Keywords: Financial Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 34
Date: 2009-06-16
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/51182/files/WP ... 20Daouk%20_%20Ng.pdf (application/pdf)

Related works:
Journal Article: Is unlevered firm volatility asymmetric? (2011)
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:ags:cudawp:51182

DOI: 10.22004/ag.econ.51182

Access Statistics for this paper

More papers in Working Papers from Cornell University, Department of Applied Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().