The leverage effect between returns and volatility of Shanghai Composite Index(SCI),was investigated and is was studied whether the observed socalled leverage effect is caused by a negative correlation between the lagged returns and the current continuous variance component and/or current jumps by using a nonparametric decomposition of the total price variation into two separate components based on the theories of realized variation and realized bipower variation.A discretetime stochastic volatility model was introduced to distinguish the jump component and continuous volatility component of price movements.Then,a nonlinear relationship among the residuals was presented by use of univariate estimation results of the separate equations,which is similar to the commonly assumed lagged leverage effect.The modeling of the joint equation system allows to further assess the interdependencies among the residuals,and the estimation results of the joint model suggest that the leverage effect works primarily through the continuous volatility component.