Asset Class Jumps

29 Pages Posted: 30 Aug 2017 Last revised: 19 Apr 2018

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: April 6, 2018

Abstract

We consider the frequency and correlation of extreme return observations or “jumps” across equities, Treasury bonds, corporate bonds, currencies, commodities, and real estate. Understanding more about jumps is important to investors as diversification across asset classes is diminished if jumps occur often and are highly correlated. Our results indicate that the presence of jumps in all assets. However, the average jump correlation across asset classes is just -0.01, which clearly indicates that diversifying across asset classes provides a meaningful reduction in the jump risk an investor is exposed to.

Keywords: Asset Classes, Jump Risk

JEL Classification: G11, G23

Suggested Citation

Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Asset Class Jumps (April 6, 2018). Available at SSRN: https://ssrn.com/abstract=3027779 or http://dx.doi.org/10.2139/ssrn.3027779

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

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Nhut H. Nguyen

Auckland University of Technology ( email )

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Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
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