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Gain/loss asymmetry in time series of individual stock prices and its relationship to the leverage effect

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  • Johannes Vitalis Siven
  • Jeffrey Todd Lins

Abstract

Previous research has shown that for stock indices, the most likely time until a return of a particular size has been observed is longer for gains than for losses. We establish that this so-called gain/loss asymmetry is present also for individual stocks and show that the phenomenon is closely linked to the well-known leverage effect -- in the EGARCH model and a modified retarded volatility model, the same parameter that governs the magnitude of the leverage effect also governs the gain/loss asymmetry.

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File URL: http://arxiv.org/pdf/0911.4679
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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 0911.4679.

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Date of creation: Nov 2009
Date of revision: Nov 2009
Handle: RePEc:arx:papers:0911.4679

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Web page: http://arxiv.org/

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