IDEAS home Printed from https://ideas.repec.org/a/icf/icfjaf/v20y2014i2p5-17.html
   My bibliography  Save this article

Application of the Concept of Dissonance to Explain the Phenomenon of Return-Volatility Relationship

Author

Listed:
  • Debasis Bagchi

Abstract

In this paper, we attempt to provide a behavioral explanation to the observed asymmetric return-volatility relationship. In some cases, the affect heuristic, mental accounting and extrapolation bias may not be adequate to explain return-volatility dynamics. We build up three hypotheses to establish whether return-volatility relationship is influenced by cognitive dissonance. We observe that both positive and negative relationships exist for return-volatility dynamics. We show that cognitive dissonance is responsible for return-volatility relationship and which can explain their observed negative and positive relationships. Our third hypothesis relates to significance of volatility feedback theory. We find that it is rejected, which confirms that volatility feedback theory is not always tenable for explaining asymmetric return-volatility relationship.

Suggested Citation

  • Debasis Bagchi, 2014. "Application of the Concept of Dissonance to Explain the Phenomenon of Return-Volatility Relationship," The IUP Journal of Applied Finance, IUP Publications, vol. 20(2), pages 5-17, April.
    • Handle: RePEc:icf:icfjaf:v:20:y:2014:i:2:p:5-17
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sayantan Khanra & Sanjay Dhir, 2017. "Creating Value in Small-cap Firms by Mitigating Risks of Market Volatility," Vision, , vol. 21(4), pages 350-355, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjaf:v:20:y:2014:i:2:p:5-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: G R K Murty (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.