Jumps in stock prices: New insights from old data

James A. Johnson, Marcelo Medeiros () and Bradley S. Paye

Journal of Financial Markets, 2022, vol. 60, issue C

Abstract: We characterize jump dynamics in U.S. stock market returns using a novel series of intraday prices covering almost 90 years. Jump dynamics vary substantially over time. Trends in jump activity relate to secular shifts in the nature of news. Unscheduled news often involving major wars drives jump activity in early decades, whereas scheduled news and especially news pertaining to monetary policy drives jump activity in recent decades. Jump variation measures forecast excess stock market returns, consistent with theory. Results support models featuring a separate jump factor, such that risk premium dynamics are not fully captured by volatility state variables.

Keywords: Stock market jumps; Discontinuities; Equity premium; Realized variance; Announcements; Stock return predictability (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:60:y:2022:i:c:s1386418122000039

DOI: 10.1016/j.finmar.2022.100708

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