Price dynamics of individual stocks: Jumps and information

Yuewen Xiao and Jing Zhao

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This study examines individual stocks’ price dynamics by separating continuous and discontinuous price innovations and testing their mechanisms in response to information. Among the 1249 NYSE-listed stocks in our sample, the price data of 642 (607) stocks are better fitted by a pure diffusion (jump-diffusion) model. For more than 93% of the 1249 stocks, their diffusion components vary with the proxies of daily information-based trading. However, only 94 out of 607 jump-diffusion stocks have jump components varying with these proxies. Our findings demonstrate significant heterogeneity in individual stocks’ price dynamics and advocate the importance of model selection.

Keywords: Stock price; Pure diffusion model; Jump-diffusion model; Information-based trading (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319309390

DOI: 10.1016/j.frl.2019.101404

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