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Is no news still good news? Volatility feedback revisited

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  • Białkowski, Jędrzej
  • Hong, Sanghyun
  • Wagner, Moritz

Abstract

In this paper, we examine the volatility feedback effect by replicating and extending Campbell and Hentschel (CH, 1992). Consistent with CH, we find that volatility feedback is present in the U.S. equity market and has become more pronounced in recent times. The estimated effect is between two to three times larger in the extended sample period compared to earlier periods. When we expand the analysis to Australia and New Zealand, we find similar results for the former and weaker results for the latter market. Overall, the results highlight the importance of volatility feedback for analysing the risk-return relationship.

Suggested Citation

  • Białkowski, Jędrzej & Hong, Sanghyun & Wagner, Moritz, 2025. "Is no news still good news? Volatility feedback revisited," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000459
    DOI: 10.1016/j.pacfin.2025.102708
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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