Return-Volatility Relationship: Insights from Linear and Non-Linear Quantile Regression

Abstract

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An inverted U‐shaped crude oil price return‐implied volatility relationship

“…The results reported here are similar to those reported on stock volatility return, though the tail behaviors are slightly different. For example, Allen et al (2012), who used data from US and European exchanges reported that for most of the pairs they investigated, the negative dependence is greater for low and high quantiles. They also found that the lower tail negative dependence is also higher than the upper tail negative dependence.…”

“…8 and 9 show the corresponding quantile curves with the unfiltered and filtered GARCH (1,1) series. It should be noted that neither Alexander (2008) nor Allen et al (2012) used some sort of filter to control for changes in volatility. Neglecting to control for volatility changes can lead to incorrect inference in a VaR analysis.…”

“…3 For example, Allen et al (2012), Badshah (2012), Dennis et al (2006), Fleming et al (1995), Giot (2005), Han et al (2012), Hibbert et al(2008), Low (2004), Whaley (2000) and Wu (2001). 4 Examples of such studies include Christie (1982), Cheung and Ng (1992), and Duffee (1995).…”

The impact of stock market and macroeconomic variables on real estate prices dynamics: evidence from Saudi Arabia

“…The estimation of the conditional mean using OLS is extended to a similar estimation of an ensemble of models of various conditional quantile functions for data distribution (Allen et al, 2012).…”

Do U.S. investors worry about fear in international equity markets? Empirical evidence on dynamic panel data

“…1 Several studies (Agbeyegbe, 2016;Allen et al, 2012;Badshah, 2013;Badshah, Frijns, Knif, & Tourani-Rad, 2016;Frijns et al, 2010 andHibbert, Daigler, &Dupoyet, 2008) employ the CBOE's implied volatility index as a proxy of uncertainty in the riskreturn relation. They find that the implied volatility-return relation is more pronounced than using historical volatility.…”