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Asymmetric and negative return-volatility relationship: the case of the VKOSPI

Author

Listed:
  • Biao Guo
  • Qian Han
  • Doojin Ryu
  • Robert I. Webb

Abstract

This study examines the short-term relationship between stock market returns and implied volatility using high frequency data . This is the first study to analyze high frequency data on the VKOPSIa newly introduced volatility index implied by the KOSPI200 options. KOSPI 200 optioins are the most actively traded derivative contracts in the world and trading is dominate by individuals. We find a strong asymmetric and negative return-volatility relationship both at the daily and intraday frequency, which cannot be explained by the standardhypotheses on the asymmetric volatility effect. Our results also show that the relationship is more pronounced in the presence of extremely negative stock market returns.

Suggested Citation

  • Biao Guo & Qian Han & Doojin Ryu & Robert I. Webb, 2013. "Asymmetric and negative return-volatility relationship: the case of the VKOSPI," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:002046
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    Cited by:

    1. Han, Heejoon & Kutan, Ali M. & Ryu, Doojin, 2015. "Modeling and predicting the market volatility index: The case of VKOSPI," Economics Discussion Papers 2015-7, Kiel Institute for the World Economy (IfW Kiel).

    More about this item

    Keywords

    Asymmetric volatility; Implied volatility; VKOSPI; KOSPI200 options;
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