Testing for leverage effects in the returns of US equities

Abstract : This article questions the empirical usefulness of leverage effects to forecast the dynamics of equity returns. In sample, we consistently find a significant but limited contribution of leverage effects over the past 25 years of S&P 500 returns. From an out-of-sample forecasting perspective and using a variety of different models, we find no statistical or economical value in using leverage effects, provided that an asymmetric and fat-tailed conditional distribution is used. This conclusion holds both at the index level and for 70% of the individual stocks constituents of the equity index.
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Journal of Empirical Finance, Elsevier, 2018, 48, pp.290-306. 〈https://doi.org/10.1016/j.jempfin.2018.07.008〉. 〈10.1016/j.jempfin.2018.07.008〉
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https://halshs.archives-ouvertes.fr/halshs-01917590
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Soumis le : vendredi 9 novembre 2018 - 15:22:49
Dernière modification le : jeudi 7 février 2019 - 17:21:17

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Christophe Chorro, Dominique Guegan, Florian Ielpo, Hanjarivo Lalaharison. Testing for leverage effects in the returns of US equities. Journal of Empirical Finance, Elsevier, 2018, 48, pp.290-306. 〈https://doi.org/10.1016/j.jempfin.2018.07.008〉. 〈10.1016/j.jempfin.2018.07.008〉. 〈halshs-01917590〉

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