Risk, jumps, and diversification
Abstract
We test for price discontinuities, or jumps, in a panel of high-frequency intraday
stock returns and an equiweighted index constructed from the same stocks. Using a
new test for common jumps that explicitly utilizes the cross-covariance structure
in the returns to identify non-diversifiable jumps, we find strong evidence for many
modest-sized, yet highly significant, cojumps that simply pass through standard jump
detection statistics when applied on a stock-by-stock basis. Our results are further
corroborated by a striking within-day pattern in the significant cojumps, with a sharp
peak at the time of regularly scheduled macroeconomic news announcements.
Type
Journal articlePermalink
https://hdl.handle.net/10161/1911Published Version (Please cite this version)
http://dx.doi.org/10.1016/j.jeconom.2008.01.006Citation
Bollerslev, Tim et.al. Risk, jumps, and diversification. Journal of Econometrics.
144.1. (May 2008): 234–256. Print.
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Tim Bollerslev
Juanita and Clifton Kreps Distinguished Professor of Economics, in Trinity College
of Arts and Sciences
Professor Bollerslev conducts research in the areas of time-series econometrics, financial
econometrics, and empirical asset pricing finance. He is particularly well known
for his developments of econometric models and procedures for analyzing and forecasting
financial market volatility. Much of Bollerslev’s recent research has focused on
the analysis of newly available high-frequency intraday, or tick-by-tick, financial
data and so-called realized volatility measures, macroeconomic news annou
George E. Tauchen
William Henry Glasson Distinguished Professor Emeritus
George Tauchen is the William Henry Glasson Professor of Economics and professor of
finance at the Fuqua School of Business. He joined the Duke faculty in 1977 after
receiving his Ph.D. from the University of Minnesota. He did his undergraduate work
at the University of Wisconsin. Professor Tauchen is a fellow of the Econometric Society,
the American Statistical Association, the Journal of Econometrics, and the Society
for Financial Econometrics (SoFie). He is also the 2003 Duke University Sc
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