Multi-Jumps

63 Pages Posted: 30 Aug 2014

See all articles by Massimiliano Caporin

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Aleksey Kolokolov

University of Manchester - Manchester Business School

Roberto Renò

University of Verona - Department of Economics

Date Written: August 28, 2014

Abstract

We provide clear-cut evidence for economically and statistically significant multivariate jumps (multi-jumps) occurring simultaneously in stock prices by using a novel nonparametric test based on smoothed estimators of integrated variances. Detecting multi-jumps in a panel of liquid stocks is more statistically powerful and economically informative than the detection of univariate jumps in the market index. On the contrary of index jumps, multi-jumps can indeed be associated with sudden and large increases of the variance risk-premium, and possess a statistically significant forecasting power for future volatility and correlations which implies a sizable deterioration in the diversification potential of asset allocation.

Keywords: multi-jumps, co-jumps, price jumps, multivariate jumps, jumps testing

JEL Classification: C52, C53, C12, C32

Suggested Citation

Caporin, Massimiliano and Kolokolov, Aleksey and Renò, Roberto, Multi-Jumps (August 28, 2014). Available at SSRN: https://ssrn.com/abstract=2488603 or http://dx.doi.org/10.2139/ssrn.2488603

Massimiliano Caporin (Contact Author)

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Aleksey Kolokolov

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Roberto Renò

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

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