Were Stocks during the Financial Crisis More Jumpy: A Comparative Study
AbstractThis paper empirically analysis the price jump behavior of heavily traded US stocks during the recent financial crisis. Namely, I test the hypothesis that the recent financial turmoil caused no change in the price jump behavior. To accomplish this, I employ data on realized trades for 16 stocks and one ETF from the NYSE database. These data are at a 1-minute frequency and span the period from January 2008 to the end of July 2009, where the recent financial crisis is generally understood to start with the plunge of Lehman Brothers shares on September 9, 2008. I employ five model-independent and three model-dependent price jump indicators to robustly assess the price jump behavior. The results confirm an increase in overall volatility during the recent financial crisis; however, the results cannot reject the hypothesis that there was no change in price jump behavior in the data during the financial crisis. This implies that the uncertainty during the crisis was scaled up but the structure of the uncertainty seems to be the same.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp416.
Date of creation: Sep 2010
Date of revision:
Contact details of provider:
Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
financial markets; price jumps; extreme price movements; financial crisis;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- P59 - Economic Systems - - Comparative Economic Systems - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-CFN-2010-12-11 (Corporate Finance)
- NEP-FMK-2010-12-11 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brownlees, C.T. & Gallo, G.M., 2006.
"Financial econometric analysis at ultra-high frequency: Data handling concerns,"
Computational Statistics & Data Analysis,
Elsevier, vol. 51(4), pages 2232-2245, December.
- Christian T. Brownlees & Giampiero Gallo, 2006. "Financial Econometric Analysis at Ultra–High Frequency: Data Handling Concerns," Econometrics Working Papers Archive wp2006_03, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Giot, Pierre & Laurent, Sébastien & Petitjean, Mikael, 2010.
"Trading activity, realized volatility and jumps,"
Journal of Empirical Finance,
Elsevier, vol. 17(1), pages 168-175, January.
- Cornell, Bradford & Sirri, Erik R, 1992. " The Reaction of Investors and Stock Prices to Insider Trading," Journal of Finance, American Finance Association, vol. 47(3), pages 1031-59, July.
- LAHAYE, Jérôme & LAURENT, Sébastien & NEELY, Christopher J., .
"Jumps, cojumps and macro announcements,"
CORE Discussion Papers RP
-2413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- David Hirshleifer & Siew Hong Teoh, 2003.
"Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis,"
European Financial Management,
European Financial Management Association, vol. 9(1), pages 25-66.
- Hirshleifer, David & Teoh, Siew Hong, 2001. "Herd Behavior and Cascading in Capital Markets: A Review and Synthesis," MPRA Paper 5186, University Library of Munich, Germany.
- Merton, Robert C., 1976.
"Option pricing when underlying stock returns are discontinuous,"
Journal of Financial Economics,
Elsevier, vol. 3(1-2), pages 125-144.
- Merton, Robert C., 1975. "Option pricing when underlying stock returns are discontinuous," Working papers 787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007.
"Real-time price discovery in global stock, bond and foreign exchange markets,"
Journal of International Economics,
Elsevier, vol. 73(2), pages 251-277, November.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2007. "Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets," CREATES Research Papers 2007-20, School of Economics and Management, University of Aarhus.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2006. "Real-time price discovery in global stock, bond and foreign exchange markets," International Finance Discussion Papers 871, Board of Governors of the Federal Reserve System (U.S.).
- Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
- Armand Joulin & Augustin Lefevre & Daniel Grunberg & Jean-Philippe Bouchaud, 2008. "Stock price jumps: news and volume play a minor role," Papers 0803.1769, arXiv.org.
- Pirino, Davide, 2009. "Jump detection and long range dependence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(7), pages 1150-1156.
- Kleinert, H. & Chen, X.J., 2007. "Boltzmann distribution and market temperature," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 383(2), pages 513-518.
- Jan Hanousek & Evzen Kocenda & Jan Novotny, 2011. "The Identification of Price Jumps," CERGE-EI Working Papers wp434, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova).
If references are entirely missing, you can add them using this form.