Asymmetric Volatility Phenomenon (AVP) Defined
The asymmetric volatility phenomenon (AVP) refers to the stylized fact that negative return shocks tend to imply higher future volatility than do positive return shocks of the same magnitude (see Asymmetric Volatility and Risk in Equity Markets Wu (2001), Bekaert and Wu (2000)).
The asymmetric volatility phenomenon (AVP) is a market dynamic that shows that there are higher volatility levels in market down-drifts than in uptrends. Factors that cause this phenomenon have been attributed to several possible sources, such as panic selling contagion leading to serial correlation, the effects of leverage in the markets, volatility feedback and psychological investment factors related to the perceived risk at different market levels.
