Jumps and Information Flow in Financial Markets
Review of Financial Studies, Forthcoming
65 Pages Posted: 27 Sep 2011
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: Suggested Citation
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