Author : Junye Li
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Book Synopsis Volatility Components, Leverage Effects, and the Return-Volatility Relations by : Junye Li
Download or read book Volatility Components, Leverage Effects, and the Return-Volatility Relations written by Junye Li and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the return-volatility relation by taking into account the model specification problem. The market volatility is modeled to have two components, one due to the diffusion risk and the other due to the jump risk. The model indicates that under the absence of leverage effects, it becomes a variant of Merton's ICAPM, while under the existence of leverage effects, the return-volatility relations are determined by interactions between risk premia and leverage effects. Empirically, I find a robust negative relationship between the excess return and the jump volatility, whereas the relationship between the excess return and the diffusion volatility is hard to identify notwithstanding that the indirect evidence of the positive relationship exists.