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Price Jump Indicators: Stock Market Empirics During the Crisis

  • Jan Novotný

    ()

  • Jan Hanousek

    ()

  • Evžen Kočenda

    ()

We analyze the behavior and performance of multiple price jump indicators across markets and over time. By using high-frequency stock market data we identify clusters of price jump indicators that share similar properties in terms of their performance in that they minimize Type I and Type II errors. We show that clusters of price jump indicators formed over the observations do not exhibit equal size. Clusters are stable across stock market indices and accuracy across price jump indicators are both stable over time. There was no significant change in the composition of clusters associated with market activity and the detected numbers of price jumps are stable over time. The recent financial crisis does not seem to affect the overall jumpiness of mature or emerging stock markets. Our results support the stress testing approach of the Basel III Accords in that the jump component of the volatility process does not need to be treated separately for the purpose of stress testing.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp1050.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1050.

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Length: pages
Date of creation: 01 Jun 2013
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Handle: RePEc:wdi:papers:2013-1050
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