Leverage and volatility feedback effects in high-frequency data

Published

Journal Article

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. © 2006 Oxford University Press.

Full Text

Duke Authors

Cited Authors

  • Bollerslev, T; Litvinova, J; Tauchen, G

Published Date

  • June 1, 2006

Published In

Volume / Issue

  • 4 / 3

Start / End Page

  • 353 - 384

Electronic International Standard Serial Number (EISSN)

  • 1479-8417

International Standard Serial Number (ISSN)

  • 1479-8409

Digital Object Identifier (DOI)

  • 10.1093/jjfinec/nbj014

Citation Source

  • Scopus