Internationally Correlated Jumps

Kuntara Pukthuanthong and Richard Roll

The Review of Asset Pricing Studies, 2015, vol. 5, issue 1, 92-111

Abstract: Stock returns are characterized by extreme observations, jumps that would not occur under the smooth variation typical of a Gaussian process. Jumps are prevalent in most countries, but their cross-country comovements have not been extensively documented. This is important because international diversification is less effective if jumps are frequent, unpredictable, and strongly correlated. We investigate using returns on broad equity indexes from eighty-two countries and modern statistical measures of jumps. We find that jumps are weakly correlated internationally, except within Europe. Although the variation in ordinary returns seems to reflect systematic global factors, jumps are more idiosyncratic.

JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:5:y:2015:i:1:p:92-111.

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