Asymmetric Volatility Phenomenon: Evidence from Professional Fund Manager Behavior in Emerging Market

This paper investigates whether there is the heterogeneity for fund manager as investor and an asymmetric volatility under short-sales constraints and if so, which factors are driving for it in Korean fund market using fund return data over period of 2002-2008. Specifically, with short-sales constrains we test the hypothesis of the difference of opinion developed by Chen et el. (2001) and Hong and Stein (2003). The result from GJR-GARCH (1, 1) model shows that there is an asymmetric volatility in fund return, as well. While, when turnover is used as the proxy for differences of opinion among fund managers, there isn’t enough evidence that asymmetric volatility is based on investor heterogeneity effect. The existence of leverage effect is not observed in the Korea fund market as well.