The dynamic interaction between volatility and returns in the US stock market using leveraged bootstrap simulations
AbstractOne of the most important stylized facts in finance is that stock index returns are inversely related to volatility. The theoretical rationale behind the proposition is still controversial. The causal relationship between returns and volatility is investigated in the US stock market over the period 2004-2009 using daily data. We apply a bootstrap test with leveraged adjustments that is robust to non-normality and ARCH. We find that the volatility causes returns negatively and returns cause volatility positively. The policy implications of our findings are discussed in the main text.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in International Business and Finance.
Volume (Year): 25 (2011)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/ribaf
Volatility Returns Causality Leveraged bootstrapping;
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