Modeling Market Downside Volatility

Feunou, Bruno; Tedongap, Roméo

doi:10.2139/ssrn.1567158

Cited by 28 publications

(35 citation statements)

References 45 publications

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“…Then, it is interesting to see whether the different perception of risk is also transmitted across stocks. The decomposition of volatility into bad and good volatility based on negative and positive returns can be perceived as a degree of downside and upside risk (Feunou et al, 2013). Bad volatility may result from a single negative news of high importance, increased political risk, worsening of the economic conditions, etc.…”

Section: How Does Bad and Good Volatility Spill Over Us Sectors?mentioning

confidence: 99%

“…Good volatility may also materialize for various reasons: due to positive macroeconomic, sectoral, or firm-specific announcements; legal or tax measures improving business conditions; the end of a recession; etc. More details on bad and good volatility are provided, for example, in Bartram et al (2012); Feunou et al (2013) or Segal et al (2014).…”

Section: How Does Bad and Good Volatility Spill Over Us Sectors?mentioning

confidence: 99%

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Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers

Baruník

Kočenda

Vácha

2016

Journal of Financial Markets

373

153

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Section: How Does Bad and Good Volatility Spill Over Us Sectors?mentioning

confidence: 99%

Section: How Does Bad and Good Volatility Spill Over Us Sectors?mentioning

confidence: 99%

Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers

Baruník

Kočenda

Vácha

2016

Journal of Financial Markets

373

153

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“…While we focus on the variation in the aggregate macroeconomic variables, Feunou et al (2013) and Patton and Sheppard (2014) entertain a similar type of semivariance measures in the context of stock market variation. 11…”

Section: Measurement Of Good and Bad Uncertaintiesmentioning

confidence: 99%

“…In terms of estimating two types of uncertainties, the literature has mainly focused on return-based measures. Patton and Sheppard (2014), Feunou et al (2013), and Bekaert et al (2014) use return data to capture fluctuations in good and bad volatilities, and study their effects on the dynamics of equity returns. Specifically, Patton and Sheppard (2014) and Feunou et al (2013) use realized semivariance measures to construct the two volatilities, whereas we construct bad and good uncertainty measures directly from the macro aggregates.…”

Section: Introductionmentioning

confidence: 99%

Good and bad uncertainty: Macroeconomic and financial market implications

Segal

Shaliastovich

Yaron

2015

Journal of Financial Economics

422

129

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Does macroeconomic uncertainty increase or decrease aggregate growth and asset prices? To address this question, we decompose aggregate uncertainty into 'good' and 'bad' volatility components, associated with positive and negative innovations to macroeconomic growth. We document that in line with our theoretical framework, these two uncertainties have opposite impact on aggregate growth and asset prices. Good uncertainty predicts an increase in future economic activity, such as consumption, output, and investment, and is positively related to valuation ratios, while bad uncertainty forecasts a decline in economic growth and depresses asset prices. Further, the market price of risk and equity beta of good uncertainty are positive, while negative for bad uncertainty. Hence, both uncertainty risks contribute positively to risk premia, and help explain the cross-section of expected returns beyond cash flow risk.

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“…First, we generalize 3 The technique was quickly adopted in several recent contributions, see e.g. Feunou et al (2013); Patton and Sheppard (2015); Segal et al (2015). Full details on the DY index and realized semivariances is provided in section 3.…”

Section: Introductionmentioning

confidence: 99%

Asymmetric Volatility Connectedness on Forex Markets

2016

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We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -2015 we document the dominating asymmetries in spillovers that are due to bad rather than good volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the net positive asymmetries in volatility spillovers, while fiscal factors are linked with net negative spillovers.

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Modeling Market Downside Volatility

Cited by 28 publications

References 45 publications

Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers

Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers

Good and bad uncertainty: Macroeconomic and financial market implications

Asymmetric Volatility Connectedness on Forex Markets

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