On idiosyncratic stochasticity of financial leverage effects Articles uri icon

authors

  • BRETO MARTINEZ, CARLES

publication date

  • August 2014

start page

  • 20

end page

  • 26

volume

  • 91

international standard serial number (ISSN)

  • 0167-7152

electronic international standard serial number (EISSN)

  • 1879-2103

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.

keywords

  • stochastic leverage; random-walk time-varying parameter; non-linear non-gaussian state-space model; maximum likelihood estimation; particle filter; volatility model; time-series