Cross-Company Jump Spillover and the Role of News

Abstract

We study how jumps spillover and the cross-company impact of firm-specific unscheduled news on jumps between economic sectors. To this end, we employ high-frequency data of 220 constituents of the Russell 3000 index equally divided into eleven sectors. Using conditional jump probabilities we find that jump spillover is a pervasive phenomenon enhanced when jumps cluster and that firm-specific news, especially of the financial sector, boosts the jump spillover effect. Volatility following spillover jumps is significantly higher than usual, except when firm-specific news is released around the jump provoking the spillover.

Keywords: price jumps, spillover jumps, economic sectors, volatility persistence, news data