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Explaining asymmetric volatility around the world

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  • Talpsepp, Tõnn
  • Rieger, Marc Oliver
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    Abstract

    Based on the APARCH model and two outlier detection methods, we compute reliable time series of volatility asymmetry for 49 countries with relatively few observations. Results show a steady increase in the asymmetry over the years for most countries. We find that economic development and market capitalization/GDP are the most important factors that increase volatility asymmetry. We also find that higher participation of private investors and coverage by financial analysts increase the asymmetry, suggesting investor sentiment as a driving force. Leverage and feasibility of short selling increase volatility in falling market conditions, although only to a smaller extent.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 17 (2010)
    Issue (Month): 5 (December)
    Pages: 938-956

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    Handle: RePEc:eee:empfin:v:17:y:2010:i:5:p:938-956

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    Web page: http://www.elsevier.com/locate/jempfin

    Related research

    Keywords: Volatility asymmetry Leverage effect Short selling APARCH model;

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