On the Common Determinants of Volatility Persistence and Asymmetry
37 Pages Posted: 10 Mar 2019 Last revised: 18 May 2021
Date Written: March 29, 2019
This study presents empirical evidence that volatility persistence and asymmetry are jointly affected by market conditions such as return and volatility. Using 28 equity market indices in developed and emerging countries, we show that daily volatility persistence increases with returns, especially negative returns, but decreases with volatility level. The daily conditional volatility persistence has large variations and has strong explanatory power for future volatility. It often accounts for more volatility asymmetry than the leverage effect and volatility feedback. Global variables have a strong impact on local volatility persistence in most developed markets. Local variables dominate local volatility persistence in emerging markets.
Keywords: volatility persistence, asymmetric volatility, realized variance, global market condition
JEL Classification: G12, G15, C22, F36
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