Roughing up beta: Continuous versus discontinuous betas and the cross section of expected stock returns

Tim Bollerslev, Sophia Zhengzi Li and Viktor Todorov

Journal of Financial Economics, 2016, vol. 120, issue 3, 464-490

Abstract: We investigate how individual equity prices respond to continuous and jumpy market price moves and how these different market price risks, or betas, are priced in the cross section of expected stock returns. Based on a novel high-frequency data set of almost 1,000 stocks over two decades, we find that the two rough betas associated with intraday discontinuous and overnight returns entail significant risk premiums, while the intraday continuous beta does not. These higher risk premiums for the discontinuous and overnight market betas remain significant after controlling for a long list of other firm characteristics and explanatory variables.

Keywords: Market price risks; Jump betas; High-frequency data; Cross-sectional return variation (search for similar items in EconPapers)
JEL-codes: C13 C14 G11 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:120:y:2016:i:3:p:464-490

DOI: 10.1016/j.jfineco.2016.02.001

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