ABSTRACT

Inclusion of jump component in the price process has been a long debate in finance literature. In this paper, we identify and characterize jump risks in the Canadian stock market using high-frequency data from the Toronto Stock Exchange. Our results provide a strong evidence of jump clustering – about 30% of jumps occur within first 30 minutes of trading hours, and about 25% of jumps are due to the overnight returns. While average intraday jump is negative, jumps induced by overnight returns bring a cancellation effect yielding average size of the jumps to zero. We show that the economic significance of jump component in volatility forecasting is significant but nominal. Our results further demonstrate that market jumps and overnight returns bring significant changes in systematic risk of stocks. From a cross-sectional perspective, while the average effect of market jumps on the beta is not significantly different from zero, the average effect of overnight returns is statistically significant. Overall, our results suggest that systematic risk induced by the market jumps could be hedged by combining value stocks and growth stocks in a portfolio whereas the systematic risk induced by overnight returns can not be hedged even with a well diversified portfolio.

摘要

在价格过程中包含跳跃分量一直是金融文献中的一个长期争论。在本文中，我们使用多伦多证券交易所的高频数据识别和表征加拿大股票市场的跳跃风险。我们的结果提供了跳跃聚类的有力证据——大约 30% 的跳跃发生在交易时间的前 30 分钟内，大约 25% 的跳跃是由于隔夜收益。虽然日内平均跳跃是负数，但隔夜收益引起的跳跃会带来抵消效应，使跳跃的平均大小为零。我们表明，波动率预测中跳跃分量的经济意义是显着的，但只是名义上的。我们的研究结果进一步表明，市场跳涨和隔夜收益带来股票系统风险的显着变化。从横截面来看，虽然市场跳跃对贝塔的平均影响与零没有显着差异，但隔夜收益的平均影响在统计上是显着的。总体而言，我们的结果表明，可以通过将价值股和成长股组合在一个投资组合中来对冲由市场跳涨引起的系统性风险，而即使投资组合多元化，也无法对冲由隔夜收益引起的系统性风险。