Author: Sofiane Aboura Publisher: ISBN: Category : Languages : en Pages : 62
Book Description
Asymmetric volatility in equity markets has been widely documented in finance, where two competing explanations, as considered in Bekaert and Wu (2000), are the financial leverage and the volatility feedback hypothesis. We explicitly test for the role of both hypotheses in explaining extreme daily U.S. equity market movements during the period January 1990 to September 2008. To this aim, we examine asymmetric volatility based on a novel model of market returns, implied market volatility and volatility of volatility. We then test for extreme asymmetry and the distinct predictions of both hypotheses. Our results document significant extreme asymmetric volatility. This effect is contemporaneous, consistent with both hypotheses, and it is important for large market declines. We further derive aggregate asset pricing implications under extreme volatility feedback. Given our results, asymmetric volatility, which includes the effect of volatility feedback at extreme levels, is shown to play an important role in explaining substantial equity market declines.
Author: Sofiane Aboura Publisher: ISBN: Category : Languages : en Pages : 43
Book Description
Asymmetric volatility in equity markets has been widely documented in finance (Bekaert and Wu (2000)). We study asymmetric volatility for daily Samp;P 500 index returns and VIX index changes, thereby examining the relation between extreme changes in risk-neutral volatility expectations, i.e. market stress, and aggregate asset prices. To this aim, we model market returns, implied VIX market volatility and volatility of volatility, showing that the latter is asymmetric in that past positive volatility shocks drive positive shocks to volatility of volatility. Our main result documents the existence of a significant extreme asymmetric volatility effect as we find contemporaneous volatility-return tail dependence for crashes but not for booms. We then outline aggregate market price implications of extreme asymmetric volatility, indicating that under volatility feedback a one-in-a-hundred trading day innovation to average VIX implied volatility, for example, relates to an expected market drop of more than 4 percent.
Author: Geert Bekaert Publisher: ISBN: Category : Investments Languages : en Pages : 76
Book Description
It appears that volatility in equity markets is asymmetric: returns and conditional volatility are negatively correlated. We provide a unified framework to simultaneously investigate asymmetric volatility at the firm and the market level and to examine two potential explanations of the asymmetry: leverage effects and time-varying risk premiums. Our empirical application uses the market portfolio and portfolios with different leverage constructed from Nikkei 225 stocks, extending the empirical evidence on asymmetry to Japanese stocks. Although volatility asymmetry is present and significant at the market and the portfolio levels, its source differs across portfolios. We find that it is important to include leverage ratios in the volatility dynamics but that their economic effects are mostly dwarfed by the volatility feedback mechanism. Volatility feedback is enhanced by a phenomenon that we term covariance asymmetry: conditional covariances with the market increase only significantly following negative market news. We do not find significant asymmetries in conditional betas.
Author: Guojun Wu Publisher: ISBN: Category : Languages : en Pages : 33
Book Description
Volatility in equity markets is asymmetric: contemporaneous return and conditional return volatility are negatively correlated. In this paper we develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy. The model allows both the leverage effect and the volatility feedback effect, the two popular explanations of the asymmetry. The model is estimated by the simulated method of moments. We find that both the leverage effect and the volatility feedback are important determinants of asymmetric volatility, and volatility feedback is significant both statistically and economically.
Author: Torben Gustav Andersen Publisher: Springer Science & Business Media ISBN: 3540712976 Category : Business & Economics Languages : en Pages : 1045
Book Description
The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Author: Thanasis Stengos Publisher: MDPI ISBN: 3038979643 Category : Business & Economics Languages : en Pages : 224
Book Description
The present Special Issue collects a number of new contributions both at the theoretical level and in terms of applications in the areas of nonparametric and semiparametric econometric methods. In particular, this collection of papers that cover areas such as developments in local smoothing techniques, splines, series estimators, and wavelets will add to the existing rich literature on these subjects and enhance our ability to use data to test economic hypotheses in a variety of fields, such as financial economics, microeconomics, macroeconomics, labor economics, and economic growth, to name a few.
Author: Klaus Grobys Publisher: BoD – Books on Demand ISBN: 3837090493 Category : Languages : en Pages : 142
Book Description
Since a vast number of investment funds are available at the market, it may be difficult for investors to figure out which fund might serve their needs the best. Especially in times where the uncertainty in the market increases, it might be even more important to figure out how investment funds response to such volatility shocks. Volatility as a risk measure may not be constant over time, but tight connected to the market risk in contrast. Hence, the exploration of the investment fund's volatility response to shocks in the stock market may give a deeper understanding of what the actual risk of an investor might be.
Author: Guglielmo M. Caporale Publisher: Edward Elgar Publishing ISBN: 1803926376 Category : Business & Economics Languages : en Pages : 683
Book Description
This comprehensive Handbook deftly examines key aspects of financial integration, providing an overview of contemporary research and new perspectives. Employing state of the art econometric methods to obtain new empirical evidence, it will be critical for designing optimal policies, and appropriate investment and risk management strategies.
Author: Sofiane Aboura
Author: Sofiane Aboura
Author: Geert Bekaert
Author: Guojun Wu
Author: Torben Gustav Andersen
Author: Thanasis Stengos
Author: Klaus Grobys
Author: Saralees Nadarajah
Author: Guglielmo M. Caporale
Author: Theolitsa Demetriou