On idiosyncratic stochasticity of financial leverage effects Articles

authors

BRETO MARTINEZ, CARLES

published in

STATISTICS & PROBABILITY LETTERS Journal

publication date

August 2014

start page

20

end page

26

volume

91

Digital Object Identifier (DOI)

https://doi.org/10.1016/j.spl.2014.04.003

full text

http://hdl.handle.net/10016/23480

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.

subjects

Economics

keywords

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