||All along, there has been still considerable room for discussion on the asymmetry of volatility. Black (1976) proposes the leverage effect as a description, while some scholars believe that the leverage effect is not sufficient enough to explain. They then propose the theory regarding the risk premium will change as time pass by, which is also known as the effect of volatility feedback. Ericsson, Huang and Mazzotta (2016), discuss both effect, use the Panel Vector Auto-regression Model, and take the endogenous factors into consideration, in order to observe the dynamic relationship between volatility, leverage ratio and the risk premium.|
In this paper, we use the Panel Data Vector Auto-regression model to study the Taiwan listed companies. We explore two types of data, one for the period 2002-2015, the frequency of data for a half year, the other period from September 2007 to the end of 2015, the frequency of data for a quarter, We find that the results of the two types of data are very similar in the Taiwan stock market, and both the leverage and volatility feedback effect can explain the volatility of the asymmetric volatility in the Taiwan stock market. What’s more, we find that there is extended effect within the leverage effect, known as Cumulative Leverage Effect.
In addition, this study also discusses the changes before, the changes after, and the changes during the financial turmoil in 2008. We find that the change before and after the financial turmoil is not huge; the leverage effect and the volatility feedback effect can both still explain the phenomenon of volatility asymmetry. However, during the financial turmoil, the leverage effect and the volatility feedback effect no longer exist.