Risk,jumps, and diversification |
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Authors: | Tim Bollerslev Tzuo Hann Law George Tauchen |
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Institution: | 1. Department of Economics, Duke University, Durham, NC 27708-0097, USA;2. 76, Lorong 7, Taman Suria, 34000 Taiping, Malaysia |
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Abstract: | We test for price discontinuities, or jumps, in a panel of high-frequency intraday stock returns and an equiweighted index constructed from the same stocks. Using a new test for common jumps that explicitly utilizes the cross-covariance structure in the returns to identify non-diversifiable jumps, we find strong evidence for many modest-sized, yet highly significant, cojumps that simply pass through standard jump detection statistics when applied on a stock-by-stock basis. Our results are further corroborated by a striking within-day pattern in the significant cojumps, with a sharp peak at the time of regularly scheduled macroeconomic news announcements. |
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Keywords: | C12 C22 C32 G12 G14 |
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