Asymmetric risk and return: evidence from the Australian Stock Exchange

Vo, Minh, Cohen, Michael and Boulter, Terry 2015, Asymmetric risk and return: evidence from the Australian Stock Exchange, Pacific basin finance journal, vol. 35, pp. 558-573, doi: 10.1016/j.pacfin.2015.10.003.

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Title Asymmetric risk and return: evidence from the Australian Stock Exchange
Author(s) Vo, Minh
Cohen, Michael
Boulter, Terry
Journal name Pacific basin finance journal
Volume number 35
Start page 558
End page 573
Total pages 16
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-11
ISSN 0927-538X
Summary This paper examines volatility asymmetry in a financial market using a stochastic volatility framework. We use the MCMC method for model estimations. There is evidence of volatility asymmetry in the data. Our asymmetric stochastic volatility in mean model, which nests both asymmetric stochastic volatility (ASV) and stochastic volatility in mean models (SVM), indicates ASV sufficiently captures the risk-return relationship; therefore, augmenting it with volatility in mean does not improve its performance. ASV fits the data better and yields more accurate out-of-sample forecasts than alternatives. We also demonstrate that asymmetry mainly emanates from the systematic parts of returns. As a result, it is more pronounced at the market level and the volatility feedback effect dominates the leverage effect.
Language eng
DOI 10.1016/j.pacfin.2015.10.003
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
1501 Accounting, Auditing And Accountability
1502 Banking, Finance and Investment
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2015, Elsevier
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Document type: Journal Article
Collection: Deakin Graduate School of Business
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