Risk, jumps, and diversification

Tim Bollerslev, Tzuo Hann Law and George Tauchen ()

Journal of Econometrics, 2008, vol. 144, issue 1, 234-256

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.

Date: 2008
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Working Paper: Risk, Jumps, and Diversification (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:144:y:2008:i:1:p:234-256

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