On idiosyncratic stochasticity of financial leverage effects
arXiv:1312.5496 · doi:10.1016/j.spl.2014.04.003
Abstract
We model leverage as stochastic but independent of return shocks and of volatility and perform likelihood-based inference via the recently developed iterated filtering algorithm using S&P500 data, contributing new evidence to the still slim empirical support for random leverage variation.
8 pages, 2 figures