This paper examines the phenomenon of asymmetric volatility in equity markets, where returns and conditional volatility are negatively correlated. The authors develop a unified framework to investigate this asymmetry at both the firm and market levels, and explore two potential explanations: leverage effects and time-varying risk premiums. Using data from the Nikkei 225 stocks, they find that volatility asymmetry is significant at both the market and portfolio levels, but its source varies across portfolios. The study highlights the importance of including leverage ratios in the volatility dynamics, though their economic effects are overshadowed by the volatility feedback mechanism. The authors also introduce the concept of covariance asymmetry, where conditional covariances with the market increase more significantly following negative market news. They do not find significant asymmetries in conditional betas. The paper contributes to the literature by providing a comprehensive empirical framework and documenting new phenomena that help explain volatility asymmetry.This paper examines the phenomenon of asymmetric volatility in equity markets, where returns and conditional volatility are negatively correlated. The authors develop a unified framework to investigate this asymmetry at both the firm and market levels, and explore two potential explanations: leverage effects and time-varying risk premiums. Using data from the Nikkei 225 stocks, they find that volatility asymmetry is significant at both the market and portfolio levels, but its source varies across portfolios. The study highlights the importance of including leverage ratios in the volatility dynamics, though their economic effects are overshadowed by the volatility feedback mechanism. The authors also introduce the concept of covariance asymmetry, where conditional covariances with the market increase more significantly following negative market news. They do not find significant asymmetries in conditional betas. The paper contributes to the literature by providing a comprehensive empirical framework and documenting new phenomena that help explain volatility asymmetry.