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Asymmetric attention and volatility asymmetry

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  • Dzieliński, Michał
  • Rieger, Marc Oliver
  • Talpsepp, Tõnn

Abstract

Analyzing a large sample of U.S. firms, we show that the asymmetry of stock return volatility is positively related to investor attention and differences of opinion. Using the number of analysts following a given firm to capture attention and the dispersion in analyst forecasts as a common proxy for differences of opinion, we show that the two effects are complementary. Furthermore, the effect of attention is strongest among stocks with low institutional ownership and high idiosyncratic volatility. Our results are robust to the traditional “leverage effect” explanation of volatility asymmetry. The findings relate to the previously documented relationship between attention and volatility and suggest that volatility asymmetry is driven by asymmetric attention.

Suggested Citation

  • Dzieliński, Michał & Rieger, Marc Oliver & Talpsepp, Tõnn, 2018. "Asymmetric attention and volatility asymmetry," Journal of Empirical Finance, Elsevier, vol. 45(C), pages 59-67.
    • Handle: RePEc:eee:empfin:v:45:y:2018:i:c:p:59-67
    DOI: 10.1016/j.jempfin.2017.09.010
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    More about this item

    Keywords

    Volatility asymmetry; Leverage effect; Analysts; Investor attention;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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