Testing for Leverage Effects in the Returns of US Equities
Christophe Chorro (),
Florian Ielpo () and
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Christophe Chorro: CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
This article questions the empirical usefulness of leverage effects to describe the dynamics of equity returns. Relying on both in and out of sample tests we consistently find a weak contribution of leverage effects over the past 25 years of S&P 500 returns. The skewness in the conditional distribution of the returns's time series models in found to explain most of the returns' distribution's asymmetry. This conclusion holds both at the index level and for 70% of the individual stocks constituents of the equity index.
Keywords: Leverage effect; S&P 500; Generalized hyperbolic distributions; Mixture of Gaussian distributions; GARCH; Asymmetry (search for similar items in EconPapers)
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Published in 2017
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Journal Article: Testing for leverage effects in the returns of US equities (2018)
Working Paper: Testing for leverage effects in the returns of US equities (2018)
Working Paper: Testing for Leverage Effects in the Returns of US Equities (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00973922
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