On the Common Determinants of Volatility Persistence and Asymmetry

37 Pages Posted: 10 Mar 2019 Last revised: 18 May 2021

See all articles by Shuning Chen

Shuning Chen

Tianjin University; Zhongnan University of Economics and Law

Jian-Xin Wang

University of Technology Sydney; Financial Research Network (FIRN)

Date Written: March 29, 2019

Abstract

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

Suggested Citation

Chen, Shuning and Chen, Shuning and Wang, Jian-Xin, On the Common Determinants of Volatility Persistence and Asymmetry (March 29, 2019). Available at SSRN: https://ssrn.com/abstract=3335572 or http://dx.doi.org/10.2139/ssrn.3335572

Shuning Chen

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

HOME PAGE: http://www.tju.edu.cn

Jian-Xin Wang (Contact Author)

University of Technology Sydney ( email )

UTS Business School
Finance Decipline
Sydney, NSW
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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