Jump Tail Dependence in the Chinese Stock Market

Sophia Zhengzi Li, Hao Wang and Hua Zhao

Emerging Markets Finance and Trade, 2016, vol. 52, issue 10, 2379-2396

Abstract: The article examines the characteristics and implications of jump tail dependence in the Chinese stock market with high-frequency data. The results indicate that jumps contribute significantly to tail dependence between individual stocks and the aggregate market. Jumps are more tail dependent than raw returns and account for an average of 17 percent of the daily tail-dependence coefficient. We also find that jump tail dependence is asymmetric and substantially stronger in the lower tail than in the upper tail. Ignoring jump tail dependence may lead to underestimation of risks and produce inaccurate conclusions about the tail neutrality of a portfolio.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:52:y:2016:i:10:p:2379-2396

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DOI: 10.1080/1540496X.2015.1073988

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