Skip Navigation


RFS Advance Access originally published online on December 9, 2007
Review of Financial Studies 2008 21(6):2535-2563; doi:10.1093/rfs/hhm056
This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
21/6/2535    most recent
hhm056v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Lee, S. S.
Right arrow Articles by Mykland, P. A.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org.

Jumps in Financial Markets: A New Nonparametric Test and Jump Dynamics

Suzanne S. Lee
Georgia Institute of Technology

Per A. Mykland
Department of Statistics, University of Chicago

Address correspondence to Suzanne S. Lee, Georgia Institute of Technology, College of Management, Atlanta, GA 30332; telephone: 404-822-1552; fax: 404-894-6030; e-mail: suzanne.lee{at}mgt.gatech.edu.

JEL Classification: G12, G22, G14


  Abstract

This article introduces a new nonparametric test to detect jump arrival times and realized jump sizes in asset prices up to the intra-day level. We demonstrate that the likelihood of misclassification of jumps becomes negligible when we use high-frequency returns. Using our test, we examine jump dynamics and their distributions in the U.S. equity markets. The results show that individual stock jumps are associated with prescheduled earnings announcements and other company-specific news events. Additionally, S&P 500 Index jumps are associated with general market news announcements. This suggests different pricing models for individual equity options versus index options.

We thank Federico Bandi, George Constantinides, Pietro Veronesi, Ruey Tsay, Matthew Spiegel (the executive editor), and two anonymous referees for helpful suggestions and comments. Financial support for this research from the National Science Foundation (DMS-02-04639, DMS-06-04758, and SES-06-31605), Oscar Mayer Dissertation Fellowships, and the Financial Mathematics Program at the University of Chicago is gratefully acknowledged. Lee also thanks for their comments the participants of the 2006 North American Econometric Society Summer Meeting, the 2006 Far Eastern Meeting of Econometric Society, the International Workshop on Applied Probability, the 6th All-Georgia Finance Conference, and the Department Seminar of Industrial and System Engineering at Georgia Tech. Comments are welcome.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
V. Todorov
Variance Risk-Premium Dynamics: The Role of Jumps
Rev. Financ. Stud., May 6, 2009; (2009) hhp035v1.
[Abstract] [Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.