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Does the Financial Leverage Effect Depend on Volatility Regimes?
- Authors
- Chon, Sora; Kim, Jaeho
- Issue Date
- Mar-2021
- Publisher
- Elsevier BV
- Keywords
- Leverage effect; Regime switching; Stochastic volatility
- Citation
- Finance Research Letters, v.39, pp 1 - 7
- Pages
- 7
- Indexed
- SSCI
SCOPUS
- Journal Title
- Finance Research Letters
- Volume
- 39
- Start Page
- 1
- End Page
- 7
- ISSN
- 1544-6123
1544-6131
- Abstract
- This paper investigates how the financial leverage effect changes across different volatility regimes. To test for regime dependency in the leverage effect, we introduce a new regime switching stochastic volatility model and apply the model to daily Standard and Poor's 500 and NASDAQ return data. Our empirical analysis that uses Bayesian inference reveals that the leverage effect is reinforced when financial markets enter into high or medium-high volatility regimes.
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Collections - COLLEGE OF BUSINESS AND ECONOMICS > DEPARTMENT OF ECONOMICS > 1. Journal Articles
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