What Makes the Market Jump?

37 Pages Posted: 14 Jun 2014 Last revised: 29 Jan 2018

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Chardin Wese Simen

University of Reading - ICMA Centre

Date Written: June 13, 2014

Abstract

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

Prokopczuk, Marcel and Wese Simen, Chardin, What Makes the Market Jump? (June 13, 2014). Available at SSRN: https://ssrn.com/abstract=2449952 or http://dx.doi.org/10.2139/ssrn.2449952

Marcel Prokopczuk (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chardin Wese Simen

University of Reading - ICMA Centre ( email )

Henley Business School
University of Reading
Reading, RG6 6BA
United Kingdom

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