Were Stocks During the Financial Crisis More Jumpy: A Comparative Study

CERGE-EI Working Paper Series No. 416

62 Pages Posted: 16 Oct 2010

See all articles by Jan Novotny

Jan Novotny

City University London - Faculty of Finance; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: September 1, 2010

Abstract

This paper empirically analysis the price jump behavior of heavily traded US stocks during the recent financial crisis. Namely, I test the hypothesis that the recent financial turmoil caused no change in the price jump behavior. To accomplish this, I employ data on realized trades for 16 stocks and one ETF from the NYSE database. These data are at a 1-minute frequency and span the period from January 2008 to the end of July 2009, where the recent financial crisis is generally understood to start with the plunge of Lehman Brothers shares on September 9, 2008. I employ five model-independent and three model-dependent price jump indicators to robustly assess the price jump behavior. The results confirm an increase in overall volatility during the recent financial crisis; however, the results cannot reject the hypothesis that there was no change in price jump behavior in the data during the financial crisis. This implies that the uncertainty during the crisis was scaled up but the structure of the uncertainty seems to be the same.

Keywords: financial markets, price jumps, extreme price movements, financial crisis

JEL Classification: G01, P59

Suggested Citation

Novotny, Jan, Were Stocks During the Financial Crisis More Jumpy: A Comparative Study (September 1, 2010). CERGE-EI Working Paper Series No. 416. Available at SSRN: https://ssrn.com/abstract=1692331 or http://dx.doi.org/10.2139/ssrn.1692331

Jan Novotny (Contact Author)

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic

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

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