Publication: The sign of asymmetry and the Taylor Effect in stochastic volatility models
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2007-02
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Abstract
According to the Taylor-Effect the autocorrelations of absolute financial returns are higher than
the ones of squared returns. In this work, we analyze this empirical property for three different
asymmetric stochastic volatility models, with short and/or long memory. Specially, we investigate
how the Taylor-Effect relates to the most important model characteristics: its asymmetry and its
capacity to generate volatility persistence and kurtosis. Finally, we realize Monte Carlo
experiments to infer about possible biases of the sample Taylor-Effect and fit the models to the
return series of the Dow Jones.
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Asymmetry, Kurtosis, Long and short memory, Taylor-Effect