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| Title: | Is Unlevered Firm Volatility Asymmetric? |
| Authors: | Daouk, Hazem
Ng, David |
| Authors (Email): | Daouk, Hazem (hd35@cornell.edu)
Ng, David (dtn4@cornell.edu) |
| Keywords: | Volatility asymmetry
Financial leverage |
| JEL Codes: | G12 |
| Issue Date: | 2009-06-16 |
| Series/Report no.: | Working Paper
WP 2009-23 |
| Abstract: | Asymmetric volatility refers to the stylized fact that stock volatility is negatively correlated to stock returns. Traditionally, this phenomenon has been explained by the financial leverage effect. This explanation has recently been challenged in favor of a risk premium based explanation. We develop a
new, unlevering approach to document how well financial leverage, rather than size, beta, book-to-market, or operating leverage, explains volatility asymmetry on a firm-by-firm basis. Our results reveal
that, at the firm level, financial leverage explains much of the volatility asymmetry. This result is robust
to different unlevering methodologies, samples, and measurement intervals. However, we find that financial leverage does not explain index-level volatility asymmetry, which is consistent with theoretical
results in Aydemir, Gallmeyer and Hollifield (2006). |
| URI: | http://purl.umn.edu/51182 |
| Institution/Association: | Cornell University>Department of Applied Economics and Management>Working Papers |
| Total Pages: | 34 |
| Collections: | Working Papers
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Files in This Item:
| File |
Description |
Size | Format |
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| WP Daouk 2009-23 Daouk & Ng.pdf | | 712Kb | PDF | View/Open |
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