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Weekday variation in the leverage effect: A puzzle

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  • Smith, Geoffrey Peter

Abstract

There is large variation in the leverage effect on each weekday. In the past 15 years, the average difference between the impact of negative and positive stock return innovations on future volatility in the S&P 500 Index is 45% on Monday, 14% on Tuesday, 60% on Wednesday, 6% on Thursday, and 28% on Friday. This variation is not predicted by any prevailing hypothesis on why there is a leverage effect.

Suggested Citation

  • Smith, Geoffrey Peter, 2016. "Weekday variation in the leverage effect: A puzzle," Finance Research Letters, Elsevier, vol. 17(C), pages 193-196.
    • Handle: RePEc:eee:finlet:v:17:y:2016:i:c:p:193-196
    DOI: 10.1016/j.frl.2016.03.001
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    Cited by:

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    More about this item

    Keywords

    Leverage effect; Volatility feedback; EGARCH;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G19 - Financial Economics - - General Financial Markets - - - Other

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