Why are Stock Returns and Volatility Negatively Correlated?
SSRN Electronic Journal
2004
- 7Citations
- 5,429Usage
- 2Captures
Metric Options: CountsSelecting the 1-year or 3-year option will change the metrics count to percentiles, illustrating how an article or review compares to other articles or reviews within the selected time period in the same journal. Selecting the 1-year option compares the metrics against other articles/reviews that were also published in the same calendar year. Selecting the 3-year option compares the metrics against other articles/reviews that were also published in the same calendar year plus the two years prior.
Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
The literature documents that low stock returns are associated with increased volatility, but two competing explanations have proved difficult to disentangle. A negative return increases leverage making equity value more volatile. However, volatility feedback increases the risk premium when a surprise rise in volatility is expected to persist. We follow Bekaert and Wu (2000) in controlling for leverage, but distinguish between volatility regimes that persist from less persistent changes using GARCH. Supporting volatility feedback, we find changes in volatility regime are reflected in stock returns, but not GARCH. Further, variation in leverage is not important in explaining volatility dynamics.
Bibliographic Details
Provide Feedback
Have ideas for a new metric? Would you like to see something else here?Let us know