A jumping index of jumping stocks? An MCMC analysis of continuous-time models for individual stocks

Alessandro Pollastri, Paulo Jorge Maurício Rodrigues, Christian Schlag and Norman Seeger

No 372, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it is negative for the index. Furthermore, the estimates of the parameters for the stochastic processes exhibit pronounced heterogeneity in the crosssection of stocks. For example, we find that the jump size in returns decrease for larger companies. Finally, we find that a jump in the index is not necessarily accompanied by a large number of contemporaneous jumps in its constituents stocks. Indeed, we find index jump days on which only one index constituent also jumps. As a consequence, we show that index jumps can be classified as induced by either synchronous price movements of individual stocks or macroeconomic events.

Keywords: Jump-diffusion models; individual stocks; Markov Chain Monte Carlo (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/267516/1/1827621729.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:372

DOI: 10.2139/ssrn.1361861

Access Statistics for this paper

More papers in SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().