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On idiosyncratic stochasticity of financial leverage effects

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  • Carles Bret'o

Abstract

We model leverage as stochastic but independent of return shocks and of volatility and perform likelihood-based inference via the recently developed iterated filtering algorithm using S&P500 data, contributing new evidence to the still slim empirical support for random leverage variation.

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  • Carles Bret'o, 2013. "On idiosyncratic stochasticity of financial leverage effects," Papers 1312.5496, arXiv.org.
    • Handle: RePEc:arx:papers:1312.5496
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