Systemic Co-Jumps

SAFE Working Paper No. 149

49 Pages Posted: 15 Oct 2016  

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Alexey Kolokolov

Goethe University Frankfurt - Research Center SAFE

Roberto Renò

University of Verona - Department of Economics

Date Written: October 10, 2016

Abstract

The simultaneous occurrence of jumps in several stocks can be associated with major financial news, triggers short-term predictability in stock returns, is correlated with sudden spikes of the variance risk premium, and determines a persistent increase (decrease) of stock variances and correlations when they come along with bad (good) news. These systemic events and their implications can be easily overlooked by traditional univariate jump statistics applied to stock indices. They are instead revealed in a clearly cut way by using a novel test procedure applied to individual assets, which is particularly effective on high-volume stocks.

Keywords: Jumps, Return predictability, Systemic events, Variance Risk Premium

JEL Classification: C58, G11, C14

Suggested Citation

Caporin, Massimiliano and Kolokolov, Alexey and Renò, Roberto, Systemic Co-Jumps (October 10, 2016). SAFE Working Paper No. 149. Available at SSRN: https://ssrn.com/abstract=2851811 or http://dx.doi.org/10.2139/ssrn.2851811

Massimiliano Caporin

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Alexey Kolokolov (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Roberto Renò

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

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