Philippine Management Review, Vol 12, No 1 (2005)

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A Note on the Asymmetric Effect of Shocks on Market Return Volatility: The Philippine Case

Joel C. Yu

Abstract


This paper extends the research on stock return volatility in the Philippines. It presents evidence on the asymmetric effects of positive and negative shocks on the volatility of market returns in the Philippines. The empirical findings of the study provide additional support to the so-called leverage effect at the aggregate level. A drop in security returns lowers market value of equity and increases the leverage of firms. The change in financial leverage raises the risk and is reflected in increased volatility.

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