Price Jump Indicators: Stock Market Empirics During the Crisis

35 Pages Posted: 1 Aug 2013

See all articles by Jan Novotny

Jan Novotny

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences; City University London - Faculty of Finance; City University London - Faculty of Finance

Jan Hanousek

Faculty of Business and Economics, Mendel University in Brno; Centre for Economic Policy Research (CEPR)

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Date Written: June 29, 2013

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

JEL Classification: C14, C58, F37, G15, G17

Suggested Citation

Novotny, Jan and Novotny, Jan and Novotny, Jan and Hanousek, Jan and Kocenda, Evzen, Price Jump Indicators: Stock Market Empirics During the Crisis (June 29, 2013). William Davidson Institute Working Paper No. 1050, Available at SSRN: https://ssrn.com/abstract=2302835 or http://dx.doi.org/10.2139/ssrn.2302835

Jan Novotny

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Jan Hanousek

Faculty of Business and Economics, Mendel University in Brno ( email )

Brno
Czech Republic

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Evzen Kocenda (Contact Author)

Charles University in Prague - Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://kocenda.fsv.cuni.cz

Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

Pod vodarenskou vezi 4
CZ-18208 Praha 8
Czech Republic

CESifo

Poschinger Str. 5
Munich, DE-81679
Germany

University of Regensburg - Institute for East and Southeast European Studies

Landshuterstr. 4
Regensburg, 93047
Germany

University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

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