IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v50y2015i3p331-340.html
   My bibliography  Save this article

New Evidence on Sources of Leverage Effects in Individual Stocks

Author

Listed:
  • Geoffrey Peter Smith

Abstract

I test Black's leverage effect hypothesis on a panel of U.S. stocks from 1997 to 2012. I find that negative stock return innovations increase the future volatility of equity returns by about 36% more than positive ones. There is a strong and positive relation between variation in the size of these leverage effects and variation in the firm's use of debt. I uncover this relation by applying the Fama/French/Carhart 4-factor asset pricing model in the exponential generalized autoregressive conditional heteroskedasticity mean equation and by using panel data to control for firm- and time-invariant unobservables via first differences and two-way fixed effects.

Suggested Citation

  • Geoffrey Peter Smith, 2015. "New Evidence on Sources of Leverage Effects in Individual Stocks," The Financial Review, Eastern Finance Association, vol. 50(3), pages 331-340, August.
    • Handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:331-340
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/fire.12069
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Smith, Geoffrey Peter, 2016. "Weekday variation in the leverage effect: A puzzle," Finance Research Letters, Elsevier, vol. 17(C), pages 193-196.
    2. Muhammad Surajo Sanusi, 2017. "Investigating the sources of Black’s leverage effect in oil and gas stocks," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1318812-131, January.
    3. Newaz, Mohammad Khaleq & Park, Jin Suk, 2019. "The impact of trade intensity and Market characteristics on asymmetric volatility, spillovers and asymmetric spillovers: Evidence from the response of international stock markets to US shocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 79-94.

    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:bla:finrev:v:50:y:2015:i:3:p:331-340. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    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.