Testing for Leverage Effects in the Returns of US Equities

Christophe Chorro (), Dominique Guegan (), Florian Ielpo and Hanjarivo Lalaharison
Additional contact information
Christophe Chorro: Centre d'Economie de la Sorbonne, http://christophe.chorro.fr/
Dominique Guegan: Centre d'Economie de la Sorbonne - Paris School of Economics, https://cv.archives-ouvertes.fr/dominique-guegan

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: 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: Asymmetry; GARCH; Mixture of Gaussian distributions; Generalized hyperbolic distributions; S&P 500; Leverage effect (search for similar items in EconPapers)
JEL-codes: C12 C22 G17 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2014-02, Revised 2017-01
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ftp://mse.univ-paris1.fr/pub/mse/CES2014/14022R.pdf (application/pdf)

Related works:
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:mse:cesdoc:14022r

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