Explaining Asymmetric Volatility around the World

54 Pages Posted: 11 Feb 2009  

Tõnn Talpsepp

Tallinn University of Technology

Marc Oliver Rieger

University of Trier

Date Written: February 11, 2009

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 increases 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.

Keywords: Volatility asymmetry, leverage e ffect, short-selling, APARCH model

JEL Classification: D49, G15, G19

Suggested Citation

Talpsepp, Tõnn and Rieger, Marc Oliver, Explaining Asymmetric Volatility around the World (February 11, 2009). Available at SSRN: https://ssrn.com/abstract=1340760 or http://dx.doi.org/10.2139/ssrn.1340760

Tõnn Talpsepp (Contact Author)

Tallinn University of Technology ( email )

Akadeemia tee 3
Tallinn, Harju 12618
Estonia

Marc Oliver Rieger

University of Trier ( email )

15, Universitaetsring
Trier, 54286
Germany

HOME PAGE: http://www.banking-finance.uni-trier.de

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