Leverage and Volatility Feedback Effects in High-Frequency Data |
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Authors: | Bollerslev, Tim Litvinova, Julia Tauchen, George |
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Abstract: | We examine the relationship between volatility and past andfuture returns using high-frequency aggregate equity index data.Consistent with a prolonged "leverage" effect, we find the correlationsbetween absolute high-frequency returns and current and pasthigh-frequency returns to be significantly negative for severaldays, whereas the reverse cross-correlations are generally negligible.We also find that high-frequency data may be used in more accuratelyassessing volatility asymmetries over longer daily return horizons.Furthermore, our analysis of several popular continuous-timestochastic volatility models clearly points to the importanceof allowing for multiple latent volatility factors for satisfactorilydescribing the observed volatility asymmetries. |
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Keywords: | high-frequency data leverage effect stochastic volatility models temporal aggregation volatility asymmetry volatility feedback effect |
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