Abstract

http://ssrn.com/abstract=1150066
 
 

References (36)



 
 

Citations (9)



 


 



Jumps and Betas: A New Framework for Disentangling and Estimating Systematic Risks


Viktor Todorov


Duke University

Tim Bollerslev


Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

August 16, 2007

CREATES Research Paper No. 2007-15

Abstract:     
We provide a new theoretical framework for disentangling and estimating sensitivity towards systematic diffusive and jump risks in the context of factor pricing models. Our estimates of the sensitivities towards systematic risks, or betas, are based on the notion of increasingly finer sampled returns over fixed time intervals. In addition to establishing consistency of our estimators, we also derive Central Limit Theorems characterizing their asymptotic distributions. In an empirical application of the new procedures using high-frequency data for forty individual stocks and an aggregate market portfolio, we find the estimated diffusive and jump betas with respect to the market to be quite different for many of the stocks. Our findings have direct and important implications for empirical asset pricing finance and practical portfolio and risk management decisions.

Number of Pages in PDF File: 37

Keywords: Factor models, systematic risk, common jumps, high-frequency data, realized variation

JEL Classification: C13, C14, G10, G12

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Date posted: June 23, 2008  

Suggested Citation

Todorov, Viktor and Bollerslev, Tim, Jumps and Betas: A New Framework for Disentangling and Estimating Systematic Risks (August 16, 2007). CREATES Research Paper No. 2007-15. Available at SSRN: http://ssrn.com/abstract=1150066 or http://dx.doi.org/10.2139/ssrn.1150066

Contact Information

Viktor Todorov (Contact Author)
Duke University ( email )
Department of Economics
Durham, NC 27708
United States
Tim Bollerslev
Duke University - Finance ( email )
Durham, NC 27708-0120
United States
919-660-1846 (Phone)
919-684-8974 (Fax)
Duke University - Department of Economics
Durham, NC 27708-0204
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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