||This paper studies common intraday jumps and relative contribution of these common
jumps in realized correlation between individual stocks and market index, using high-frequency
price data. In introducing stochastic models for stock price returns, we show that
discrete time model (binomial tree) converges to geometric brownian motion in continuous
time. We find that the common jumps significantly contribute in realized correlation
at different threshold cut-offs and both common jumps and realized correlation are
relatively consistent across time period including financial crisis. However, we observe
a statistically significant difference in realized correlation and suggestive difference
in contribution of common jumps between financial and food industry. In addition,
we find a weak, positive relationship between relative contribution of common jumps
and realized correlation, when we further sample high-frequency data into a year.
We also observe that the volatility index and market index reveal the strongest relationship.