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Asymmetric Volatility: Testing Firm-specific Factors as a Cause for the “Leverage Effect” Using GARCH-modeling

De Voogd, Joos Jacob Maarten LU and Geschiere, Thijs (2015) BUSN88 20151
Department of Business Administration
Abstract (Swedish)
This thesis aims to investigate the dynamics of the so-called “leverage-effect”. This asymmetry in volatility after negative shocks, relative to positive shocks has been documented extensively before. However, except for findings that it is not due to leverage, the underlying or enhancing factors that cause it have not been investigated. This thesis aims to do so, by testing for the influence of firm-specific variables on this volatility asymmetry size. The methods that are used are both GJR- GARCH(1,1)-modeling and the use of panel-data. The results show, except for the leverage variable, that firm-specific variables do indeed have their own characteristic effect on the size of the volatility asymmetry. The combined R- squared of the firm... (More)
This thesis aims to investigate the dynamics of the so-called “leverage-effect”. This asymmetry in volatility after negative shocks, relative to positive shocks has been documented extensively before. However, except for findings that it is not due to leverage, the underlying or enhancing factors that cause it have not been investigated. This thesis aims to do so, by testing for the influence of firm-specific variables on this volatility asymmetry size. The methods that are used are both GJR- GARCH(1,1)-modeling and the use of panel-data. The results show, except for the leverage variable, that firm-specific variables do indeed have their own characteristic effect on the size of the volatility asymmetry. The combined R- squared of the firm specific variables shows a good fit; hence they do form a considerable part of the contributing factors to the size of volatility asymmetries. (Less)
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author
De Voogd, Joos Jacob Maarten LU and Geschiere, Thijs
supervisor
organization
course
BUSN88 20151
year
type
H1 - Master's Degree (One Year)
subject
keywords
Volatility forecasts, leverage effect, GARCH, GJR-GARCH
language
English
id
5472460
date added to LUP
2015-06-16 11:55:01
date last changed
2015-06-16 11:55:01
@misc{5472460,
  abstract     = {This thesis aims to investigate the dynamics of the so-called “leverage-effect”. This asymmetry in volatility after negative shocks, relative to positive shocks has been documented extensively before. However, except for findings that it is not due to leverage, the underlying or enhancing factors that cause it have not been investigated. This thesis aims to do so, by testing for the influence of firm-specific variables on this volatility asymmetry size. The methods that are used are both GJR- GARCH(1,1)-modeling and the use of panel-data. The results show, except for the leverage variable, that firm-specific variables do indeed have their own characteristic effect on the size of the volatility asymmetry. The combined R- squared of the firm specific variables shows a good fit; hence they do form a considerable part of the contributing factors to the size of volatility asymmetries.},
  author       = {De Voogd, Joos Jacob Maarten and Geschiere, Thijs},
  keyword      = {Volatility forecasts,leverage effect,GARCH,GJR-GARCH},
  language     = {eng},
  note         = {Student Paper},
  title        = {Asymmetric Volatility: Testing Firm-specific Factors as a Cause for the “Leverage Effect” Using GARCH-modeling},
  year         = {2015},
}