The dynamic interaction between volatility and returns in the US stock market using leveraged bootstrap simulations

Abdulnasser Hatemi-J, Manuchehr Irandoust

    Research output: Contribution to journalArticlepeer-review

    10 Citations (Scopus)

    Abstract

    One of the most important stylized facts in finance is that stock index returns are inversely related to volatility. The theoretical rationale behind the proposition is still controversial. The causal relationship between returns and volatility is investigated in the US stock market over the period 2004-2009 using daily data. We apply a bootstrap test with leveraged adjustments that is robust to non-normality and ARCH. We find that the volatility causes returns negatively and returns cause volatility positively. The policy implications of our findings are discussed in the main text.

    Original languageEnglish
    Pages (from-to)329-334
    Number of pages6
    JournalResearch in International Business and Finance
    Volume25
    Issue number3
    DOIs
    Publication statusPublished - Sep 2011

    Keywords

    • Causality
    • Leveraged bootstrapping
    • Returns
    • Volatility

    ASJC Scopus subject areas

    • Business, Management and Accounting (miscellaneous)
    • Finance

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