Abstract
This study investigates the daily negative asymmetric risk-return relation between the returns on the KOSPI 200(or futures index) and the VKOSPI. We observe strong negative and asymmetric relations between the returns and volatility. The results from this study imply that the leverage hypothesis and the volatility feedback hypothesis are unable to explain the daily asymmetric return-risk relations. Instead, the empirical results are consistent with behavioral explanations. The magnitude of the asymmetric volatility appears to be stronger the returns on the KOSPI 200than the returns on the KOSPI 200futures index for the entire returns and vice versa for the negative returns. Finally, the results from regression analyses show that the returns on the KOSPI200 futures explain asymmetry more effectively than the returns on the KOSPI200. Keyword: asymmetric volatility, volatility index, implied volatility, representativeness, affect heuristic, extrapolation bias
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