Access

You are not currently logged in.

Access JSTOR through your library or other institution:

login

Log in through your institution.

Journal Article

Leverage vs. Feedback: Which Effect Drives the Equity Market during Stress Periods?

Sofiane Aboura
Annals of Economics and Statistics
No. 119/120, SPECIAL ISSUE ON HEALTH AND LABOUR ECONOMICS (December 2015), pp. 269-288
Published by: GENES on behalf of ADRES
DOI: 10.15609/annaeconstat2009.119-120.269
Stable URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.119-120.269
Page Count: 20

You can always find the topics here!

Topics: Leverage, Stock markets, Stock prices, Stock market indices
Were these topics helpful?
See somethings inaccurate? Let us know!

Select the topics that are inaccurate.

Cancel
  • More info
  • Add to My Lists
  • Cite this Item
Leverage vs. Feedback: Which Effect Drives the Equity Market during Stress Periods?
Preview not available

Abstract

Asymmetric volatility occupies a central role in the risk-return relation. However, this asymmetry has not been examined during stress periods. This article fills this gap by studying this relation at the tail distribution level with an empirical test on the French market from the creation of the implied volatility index in October 1997 until January 2013. Using a complete set of econometrical analysis before applying the multivariate extreme value theory, this article shows that the asymptotic dependence occurs only for the crash scenario in which the feedback effect dominates the leverage effect. This result has implications on the pricing and hedging of options contracts. JEL: C4, G13, G32. / KEY WORDS: Risk Management, Volatility, Extreme Value Theory, Leverage Effect, Feedback Effect.

Page Thumbnails