Asymmetric volatility Flashcards
1
Q
The Leverage Effect (definition)
A
A negative return increases volatility by more than a positive return of the same size
2
Q
The Leverage Effect (explanation)
A
A negative return on a stock decreases the equity value of the firm. If the debt is constant this implies that the leverage ratio of the firm is increasing, thus making the firm more risky.
3
Q
Negative Sign Bias Test
A
Considers
4
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5
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11
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15
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