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Empirical Analysis on the Effects of Jumps on Realized Beta and the Disentanglement of Jump Beta1

By Hao Sun

This paper constructs jump-robust estimators for the beta in Capital Asset Pricing Model (CAPM) in order to test the robustness of the recently developed Realized Beta in the presence of large discontinuous movements, or jumps, in stock prices. To complete the analysis on effect of jump on Realized Beta, this paper also disentangles jump beta and diffusive beta from the Realized Beta measurement in order to examine whether stocks react differently to jumps under the CAPM. Then, the results are compared to recent literatures tackling the same problem from different approaches.

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Advisor: George Tauchen

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