What Makes the Market Jump?
37 Pages Posted: 14 Jun 2014 Last revised: 29 Jan 2018
Date Written: June 13, 2014
Using intraday transaction prices and a non-parametric jump test, we show that jumps in the S&P 500 and VIX are low-probability, high-impact events. Extant research investigating the causes of jumps primarily focuses on scheduled macro-announcements. However, we find that unscheduled news, which has so far received little attention, triggers twice as many jumps and accounts for a larger proportion of the jump variation than scheduled news. Intriguingly, we show that close to 50% of jumps are not explained by fundamental news, revealing the presence of “excess jumps” in financial markets.
Keywords: Jumps, News, Intraday, S&P 500, VIX
JEL Classification: G12, G13
Suggested Citation: Suggested Citation