Jumps and Information Flow in Financial Markets

Review of Financial Studies, Forthcoming

65 Pages Posted: 27 Sep 2011

See all articles by Suzanne S. Lee

Suzanne S. Lee

Georgia Institute of Technology - Finance Area

Date Written: June 25, 2011

Abstract

This paper investigates the predictability of jump arrivals in U.S. stock markets. Using a new test that identifies jump predictors up to the intraday level, I find that jumps are likely to occur shortly after macroeconomic information releases such as Fed announcements, nonfarm payroll reports, and jobless claims as well as market index jumps. I also find firm-specific jump predictors related to earnings releases, analyst recommendations, past stock jumps, and dividend dates. Evidence suggests that distinguishing systematic jumps from idiosyncratic jumps is possible using the characteristics of jump predictors. Finally, I present a short-term jump size clustering.

Keywords: mixed unobservability, jump predictor tests, partial likelihood, systematic vs. idiosyncratic risk, jump size clustering, high frequency data

JEL Classification: G10, C14

Suggested Citation

Lee, Suzanne S., Jumps and Information Flow in Financial Markets (June 25, 2011). Review of Financial Studies, Forthcoming , Available at SSRN: https://ssrn.com/abstract=1933551

Suzanne S. Lee (Contact Author)

Georgia Institute of Technology - Finance Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

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