Asymmetric Attention and Volatility Asymmetry

25 Pages Posted: 9 Sep 2017

See all articles by Michał Dzieliński

Michał Dzieliński

Stockholm Business School, Stockholm University

Marc Oliver Rieger

University of Trier

Tõnn Talpsepp

Tallinn University of Technology

Date Written: August 10, 2017

Abstract

Analyzing a large sample of U.S. firms, we show that the asymmetry of stock return volatility is positively related to investor attention and differences of opinion. Using the number of analysts following a given firm to capture attention and the dispersion in analyst forecasts as a common proxy for differences of opinion, we show that the two effects are complementary. Furthermore, the effect of attention is strongest among stocks with low institutional ownership and high idiosyncratic volatility. Our results are robust to the traditional "leverage effect'' explanation of volatility asymmetry. The findings relate to the previously documented relationship between attention and volatility and suggest that volatility asymmetry is driven by asymmetric attention.

Keywords: volatility asymmetry, leverage effect, analysts, investor attention

JEL Classification: G11, G12, G14

Suggested Citation

Dzieliński, Michał and Rieger, Marc Oliver and Talpsepp, Tõnn, Asymmetric Attention and Volatility Asymmetry (August 10, 2017). Journal of Empirical Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3030226 or http://dx.doi.org/10.2139/ssrn.3030226

Michał Dzieliński (Contact Author)

Stockholm Business School, Stockholm University ( email )

Kräftriket 7
Stockholm, 106 91
Sweden

HOME PAGE: http://www.sbs.su.se/en/

Marc Oliver Rieger

University of Trier ( email )

15, Universitaetsring
Trier, 54286
Germany

HOME PAGE: http://www.banking-finance.uni-trier.de

Tõnn Talpsepp

Tallinn University of Technology ( email )

Akadeemia tee 3
Tallinn, Harju 12618
Estonia

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