Volatility in equity markets is asymmetric: contemporaneous return and conditional return volatility are negatively correlated. In this article I develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy. The model allows both the leverage effect and the volatility feedback effect, the two popular explanations of asymmetry. The model is estimated by the simulated method of moments. I find that both the leverage effect and volatility feedback are important determinants of asymmetric volatility, and volatility feedback is significant both statistically and economically. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.