Price Jump Indicators: Stock Market Empirics During the Crisis

Jan Novotny (), Jan Hanousek and Evžen Kočenda

No wp1050, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We analyze the behavior and performance of multiple price jump indicators across markets and over time. By using high-frequency stock market data we identify clusters of price jump indicators that share similar properties in terms of their performance in that they minimize Type I and Type II errors. We show that clusters of price jump indicators formed over the observations do not exhibit equal size. Clusters are stable across stock market indices and accuracy across price jump indicators are both stable over time. There was no significant change in the composition of clusters associated with market activity and the detected numbers of price jumps are stable over time. The recent financial crisis does not seem to affect the overall jumpiness of mature or emerging stock markets. Our results support the stress testing approach of the Basel III Accords in that the jump component of the volatility process does not need to be treated separately for the purpose of stress testing.

Keywords: stock markets; price jump indicators; non-parametric testing; clustering analysis; financial econometrics; Basel Accords (search for similar items in EconPapers)
JEL-codes: C14 C58 F37 G15 G17 (search for similar items in EconPapers)
Pages: pages
Date: 2013-06-01
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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