11
Volatility asymmetry, news, and private investors
Michal Dzielinski, Marc Oliver Rieger, and Tõnn Talpsepp
ABSTRACT
Volatility is typically higher in down markets. Using an international comparison of volatility asymmetry and an analysis of a complete set of stock market transactions, we show that this effect, known as “leverage effect”, is most likely driven by the over-reaction of private investors to bad news. This result is supported by our observation that an increase in attention to negative news (as measured by an increase in Google searches for keywords related to the macroeconomy like “recession”) can predict a subsequent increase in volatility.
Get The Handbook of News Analytics in Finance now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
