{"title":"The Price-Leverage Covariation as a Measure of the Response of the Leverage Effect To Price and Volatility Changes","authors":"Giacomo Toscano","doi":"10.2139/ssrn.3776771","DOIUrl":null,"url":null,"abstract":"We study the sensitivity of the leverage effect to changes in the volatility and the price, showing the existence of an analytical link between the latter and the price-leverage covariation in settings with, respectively, stochastic and level-dependent volatility. From the financial standpoint, the results we obtain allow for the interpretation of the price-leverage covariation as a gauge of the responsiveness of the leverage effect to price and volatility changes. The empirical study of S&P500 high-frequency prices over the period March, 2018-April, 2018, carried out by means of non-parametric Fourier estimators, supports this interpretation of the role of the price-leverage covariation.","PeriodicalId":11036,"journal":{"name":"Demand & Supply in Health Economics eJournal","volume":"46 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Demand & Supply in Health Economics eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3776771","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
We study the sensitivity of the leverage effect to changes in the volatility and the price, showing the existence of an analytical link between the latter and the price-leverage covariation in settings with, respectively, stochastic and level-dependent volatility. From the financial standpoint, the results we obtain allow for the interpretation of the price-leverage covariation as a gauge of the responsiveness of the leverage effect to price and volatility changes. The empirical study of S&P500 high-frequency prices over the period March, 2018-April, 2018, carried out by means of non-parametric Fourier estimators, supports this interpretation of the role of the price-leverage covariation.
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