It appears that volatility in equity markets is asymmetric: returns and conditional volatility are negatively correlated. We provide a unified framework to simultaneously investigate asymmetric volatility at the firm and the market level and to examine two potential explanations of the...

This paper compares several statistical models for monthly stock return volatility. The focus is on U.S. data from 1834-19:5 because the post-1926 data have been analyzed in more detail by others. Also, the Great Depression had levels of stock volatility that are inconsistent with stationary...

This paper investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. The idea is that "contagion" between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets. This...

Simple regression tests that have power against the alternatives that. asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over alternative, variance hounds...

This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have...

We propose testing asset-pricing models using multi-horizon returns (MHR). A correctly specified stochastic discount factor prices the cross-section of returns at all horizons. We show that MHR are informative about the model's conditional implications. Different from typical conditioning...

Most affine models of the term structure with stochastic volatility (SV) predict that the variance of the short rate is simultaneously a linear combination of yields and the quadratic variation of the spot rate. However, we find empirically that the A1(3) SV model generates a time series for the...

It is sometimes argued that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. This paper modifies the generalized autoregressive conditionally heteroskedastic (GARCH) model of returns to allow for this volatility feedback effect. The resulting...

This paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices. It demonstrates that volatility is only weakly serially correlated, implying that shocks to volatility do not persist. These shocks can therefore have only a small...