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Were Stocks during the Financial Crisis More Jumpy: A Comparative Study

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  • Jan Novotny

Abstract

This 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.

Suggested Citation

  • Jan Novotny, 2010. "Were Stocks during the Financial Crisis More Jumpy: A Comparative Study," CERGE-EI Working Papers wp416, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp416
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    References listed on IDEAS

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    Cited by:

    1. Hanousek Jan & Kočenda Evžen & Novotný Jan, 2012. "The identification of price jumps," Monte Carlo Methods and Applications, De Gruyter, vol. 18(1), pages 53-77, January.

    More about this item

    Keywords

    financial markets; price jumps; extreme price movements; financial crisis;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • P59 - Economic Systems - - Comparative Economic Systems - - - Other

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