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Explaining asymmetric volatility around the world

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  • Talpsepp, Tõnn
  • Rieger, Marc Oliver

Abstract

Based on the APARCH model and two outlier detection methods, we compute reliable time series of volatility asymmetry for 49 countries with relatively few observations. Results show a steady increase in the asymmetry over the years for most countries. We find that economic development and market capitalization/GDP are the most important factors that increase volatility asymmetry. We also find that higher participation of private investors and coverage by financial analysts increase the asymmetry, suggesting investor sentiment as a driving force. Leverage and feasibility of short selling increase volatility in falling market conditions, although only to a smaller extent.

Suggested Citation

  • Talpsepp, Tõnn & Rieger, Marc Oliver, 2010. "Explaining asymmetric volatility around the world," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 938-956, December.
  • Handle: RePEc:eee:empfin:v:17:y:2010:i:5:p:938-956
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    References listed on IDEAS

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    1. repec:gam:jjrfmx:v:11:y:2018:i:2:p:16-:d:138939 is not listed on IDEAS
    2. Simon MOORHEAD & Robert BROOKS, 2013. "The Effect of the Introduction of the Euro on Asymmetric Stock Market Returns Volatility Across the Euro-Zone," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 12(2), pages 280-301, June.
    3. repec:eee:finsta:v:30:y:2017:i:c:p:156-174 is not listed on IDEAS
    4. repec:eee:finana:v:53:y:2017:i:c:p:94-111 is not listed on IDEAS
    5. Miikka Kaurijoki & Jussi Nikkinen & Janne Äijö, 2015. "Return‐Implied Volatility Dynamics of High and Low Yielding Currencies," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(11), pages 1026-1041, November.

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