Relative Contribution of Common Jumps in Realized Correlation
By Kyu Won Choi
This paper studies common intraday jumps and relative contribution of these common jumps
in realized correlation between individual stocks and market index, using high-frequency price
data. We find that the common jumps significantly contribute in realized correlation at different
threshold cut-offs and both common jumps and realized correlation are relatively consistent across
time period including financial crisis. We also find a weak, positive relationship between relative
contribution of common jumps and realized correlation, when we further sample high-frequency
data into a year. We also observe that the volatility index and market index reveal the strongest
relationship.
Advisor: Geourge Tauchen, Tim Bollerslev | JEL Codes: C40, C58, G10 | Tagged: Diffusive Covariation, Realized Correlation, Relative Contribution of Common Jumps
Assessing the Effects of Earnings Surprise on Returns and Volatility with High Frequency Data
By Sam Lim
This paper aims to explore how “earnings surprise”—the difference between earnings
estimates and the actual announced earnings—affects a stock’s volatility and returns using
high frequency data. The results show that earnings surprise is significantly correlated with volatility and overnight returns. Furthermore, an earnings surprise is significantly correlated with an increase in volatility in the trading period immediately following the earnings announcement, but there is no bias indicating which directions prices will go. Even with no “surprise”, the announcement tends to be followed by this increase in volatility. The findings suggest the importance of earnings on equity price valuation.
Advisor: George Tauchen, Tim Bollerslev
The Elusiveness of Systematic Jumps
by Tzuo Hann Law
Abstract
We test for the presence of jumps and measure the price variance of 40 major stocks
and the index they form using intra-day returns. Subsequently, we find that jumps
can be classified into two groups: systematic and idiosyncratic. Idiosyncratic jumps
are firm specific and are usually larger than systematic jumps which affect stocks
collectively. Systematic jumps are virtually non-detectable when jump test statistics
are applied to individual stocks. The elusiveness of systematic jumps is a consequence
of their moderate size and the higher price variance of individual stocks. We also
uncover encouraging evidence for a new jump detection scheme.
Professor Tim Bollerslev, Faculty Advisor
Professor George Tauchen, Faculty Advisor
No JEL Codes on file at this time
