Volatility Puzzles : A Unified Framework for Gauging Return-Volatility Regressions ∗

@inproceedings{Bollerslev2003VolatilityP,
  title={Volatility Puzzles : A Unified Framework for Gauging Return-Volatility Regressions ∗},
  author={Tim Bollerslev and Hao Zhou},
  year={2003}
}
This paper provides a simple unified framework for assessing the empirical linkages between returns and realized and implied volatilities. First, we show that whereas the volatility feedback effect as measured by the sign of the correlation between contemporaneous return and realized volatility depends importantly on the underlying structural model parameters, the correlation between return and implied volatility is unambiguously positive for all reasonable parameter configurations. Second, the… CONTINUE READING
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