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/lp/oxford-university-press/leverage-and-volatility-feedback-effects-in-high-frequency-data-yMDhyjaSRe
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- Publisher
- Oxford University Press
- Copyright
- © Published by Oxford University Press.
- ISSN
- 1479-8409
- eISSN
- 1479-8417
- DOI
- 10.1093/jjfinec/nbj014
- Publisher site
- See Article on Publisher Site
Abstract
We examine the relationship between volatility and past and future returns using high-frequency aggregate equity index data. Consistent with a prolonged “leverage” effect, we find the correlations between absolute high-frequency returns and current and past high-frequency returns to be significantly negative for several days, whereas the reverse cross-correlations are generally negligible. We also find that high-frequency data may be used in more accurately assessing volatility asymmetries over longer daily return horizons. Furthermore, our analysis of several popular continuous-time stochastic volatility models clearly points to the importance of allowing for multiple latent volatility factors for satisfactorily describing the observed volatility asymmetries.
Journal
Journal of Financial Econometrics – Oxford University Press
Published: May 16, 2006