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Realized Volatility and Asymmetries in the A.S.E. Returns

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Author Info
Dimitrios D. Thomakos (Department of Economics University of Peloponnese)
Michail S. Koubouros (Department of Economics University of Peloponnese)

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Abstract

Using a newly developed dataset of daily, value-weighted market returns we construct and analyze the monthly realized volatility of the Athens Stock Exchange (A.S.E.) from 1985 to 2003. Our analysis focuses on the distributional and time series properties of the realized volatility series and on assessing the connection between realized volatility and returns. In particular, we find strong evidence on the existence of a volatility feedback effect and the leverage effect, and on the existence of asymmetries between lagged returns and volatility. Furthermore, we examine the cross-sectional distribution of unconditional loadings on the realized risk factor(s) for different sets of characteristics-sorted common stock portfolios. We find that realized risk is a significantly priced factor in A.S.E. and its high explanatory power for the cross- section of portfolio average returns is independent of any return variation related to the market (CAPM) or size and book-to-market (Fama- French) factors. We discuss our findings in the context of the recent literature on realized volatility and feedback effects, as well as the literature on the pricing power of realized risk.

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Paper provided by EconWPA in its series Finance with number 0507012.

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Date of creation: 09 Jul 2005
Date of revision: 17 Jan 2006
Handle: RePEc:wpa:wuwpfi:0507012

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Related research
Keywords: realized volatility; leverage effect; volatility feedback effect; asset pricing; A.S.E.;

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Find related papers by JEL classification:
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions

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  20. Shanken, Jay, 1992. "On the Estimation of Beta-Pricing Models," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 5(1), pages 1-33. [Downloadable!] (restricted)
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