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"Testing for leverage effects in the returns of US equities"

De Christophe Chorro, Dominique Guégan, Florian Ielpo, Hanjarivo Lalaharison, Journal of Empirical Finance (2018)

Christophe Chorro, Dominique Guégan, Florian Ielpo and Hanjarivo Lalaharison, "Testing for leverage effects in the returns of US equities", Journal of Empirical Finance, Elsevier, 2018, 48, pp.290-306.



Résumé :


This article questions the empirical usefulness of leverage effects to forecast the dynamics of equity returns. In sample, we consistently find a significant but limited contribution of leverage effects over the past 25 years of S&P 500 returns.

From an out-of-sample forecasting perspective and using a variety of different models, we find no statistical or economical value in using leverage effects, provided that an asymmetric and fat-tailed conditional distribution is used.

This conclusion holds both at the index level and for 70% of the individual stocks constituents of the equity index.


Codes JEL : C12, C22, G17.


DOI 10.1016/j.jempfin.2018.07.008


Dépôt sur HAL :〈halshs-01917590〉

Financement : 

This work was achieved through the Laboratory of Excellence on Financial Regulation (Labex ReFi) supported by PRES heSam, France under the reference ANR-10-LABX-0095 (2011-2022). It benefited from a French government support managed by the National Research Agency (ANR), France within the project Investissements d’Avenir Paris Nouveaux Mondes (investments for the future Paris New Worlds) under the reference ANR-11-IDEX-0006-02 (2012-2016).