Multi-jumps

Massimiliano Caporin, Aleksey Kolokolov () and Roberto RenoÕ ()
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Aleksey Kolokolov: University of Lund
Roberto RenoÕ: University of Siena
Authors registered in the RePEc Author Service: Roberto Renò

No 185, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

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.

Pages: 64 pages
Date: 2014-09
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0185

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