Asymmetric and negative return-volatility : a case study of VKOSPI

Hector Leister,   Jenae Stuhlsatz


KOSPI 200 index options are the most actively traded exchange-listed derivative contracts in the world. However, unlike most other active options markets, trading is dominated by individual investors. In this paper, examinations of the short-term relationship between stock market returns and implied volatility in the Korean financial market are conducted by using high frequency data on the recently introduced volatility index (VKOSPI) implied by KOSPI 200 options. Research results indicate that a strong asymmetric and negative return-volatility relationship at both the daily and intraday levels. Furthermore, the asymmetric relationship is more pronounced for extremely negative stock market returns. We conjecture that behavioral factors better explain the observed asymmetric return-volatility


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