The dynamics of co-jumps, volatility and correlation

Adam Clements and Yin Liao ()

No 91, NCER Working Paper Series from National Centre for Econometric Research

Abstract: Understanding the dynamics of volatility and correlation is a crucially important issue. The literature has developed rapidly in recent years with more sophisticated estimates of volatility, and its associated jump and diffusion components. Previous work has found that jumps at an index level are not related to future volatility. Here we examine the links between co-jumps within a group of large stocks, the volatility of, and correlation between their returns. It is found that the occurrence of common, or co-jumps between the stocks are unrelated to the level of volatility or correlation. On the other hand, both volatility and correlation are lower subsequent to a co-jump. This indicates that co-jumps are a transient event but in contrast to earlier research have a greater impact that jumps at an index level.

Keywords: Realized volatility; correlation; jumps; co-jumps; point process (search for similar items in EconPapers)
JEL-codes: C22 G00 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-02-24
New Economics Papers: this item is included in nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:qut:auncer:2013_3

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