An Investigation Into the Asymmetry in Asset Return Volatility

We propose a new test to measure asymmetry in volatility based on daily opening, high, low and closing prices. The test results are shown to be unbiased via both a theoretical derivation and a computer-based simulation exercise. Next, we test it on real time series data of various equity market indices. Subsequently, we make an attempt to capture the asymmetry in volatility using Heston model. Our simulation study give credence to the hypothesis that Heston Model can capture the asymmetry in volatility. We believe that this novel specification approach will add to the body of knowledge on the study of financial time series