Leverage and Volatility Feedback Effects in High-Frequency Data

Posted: 29 Feb 2008

See all articles by Tim Bollerslev

Tim Bollerslev

Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Julia Litvinova

Brattle Group

George Tauchen

Duke University - Economics Group

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

We examine the relationship between volatility and past and future returns using high-frequency aggregate equity index data. Consistent with a prolonged "leverage" effect, we find the correlations between absolute high-frequency returns and current and past high-frequency returns to be significantly negative for several days, whereas the reverse cross-correlations are generally negligible. We also find that high-frequency data may be used in more accurately assessing volatility asymmetries over longer daily return horizons. Furthermore, our analysis of several popular continuous-time stochastic volatility models clearly points to the importance of allowing for multiple latent volatility factors for satisfactorily describing the observed volatility asymmetries.

Keywords: high-frequency data, leverage effect, stochastic volatility models, temporal aggregation, volatility asymmetry, volatility feedback effect

Suggested Citation

Bollerslev, Tim and Litvinova, Julia and Tauchen, George E., Leverage and Volatility Feedback Effects in High-Frequency Data ( 2006). Journal of Financial Econometrics, Vol. 4, Issue 3, pp. 353-384, 2006. Available at SSRN: https://ssrn.com/abstract=1096982 or http://dx.doi.org/10.1093/jjfinec/nbj014

Tim Bollerslev (Contact Author)

Duke University - Finance ( email )

Durham, NC 27708-0120
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Duke University - Department of Economics

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National Bureau of Economic Research (NBER)

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Julia Litvinova

Brattle Group ( email )

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George E. Tauchen

Duke University - Economics Group ( email )

Box 90097
221 Social Sciences
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919-684-8974 (Fax)

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