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Multi-jumps

Author

Listed:
  • Caporin, Massimiliano
  • Kolokolov, Aleksey
  • Renò, Roberto

Abstract

We provide clear-cut evidence for economically and statistically significant multivariate jumps (multi-jumps) occurring simultaneously in stock prices by using a novel nonparametric test based on smoothed estimators of integrated variances. Detecting multi-jumps in a panel of liquid stocks is more statistically powerful and economically informative than the detection of univariate jumps in the market index. On the contrary of index jumps, multi-jumps can indeed be associated with sudden and large increases of the variance risk-premium, and possess a statistically significant forecasting power for future volatility and correlations which implies a sizable deterioration in the diversification potential of asset allocation.

Suggested Citation

  • Caporin, Massimiliano & Kolokolov, Aleksey & Renò, Roberto, 2014. "Multi-jumps," MPRA Paper 58175, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58175
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    References listed on IDEAS

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    Cited by:

    1. Laurini, Márcio Poletti & Mauad, Roberto Baltieri, 2015. "A common jump factor stochastic volatility model," Finance Research Letters, Elsevier, vol. 12(C), pages 2-10.

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    More about this item

    Keywords

    multi-jumps; co-jumps; price jumps; multivariate jumps; jumps testing;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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