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Disentangling the effect of jumps on systematic risk using a new estimator of integrated co-volatility
Wang K.1; Liu J.1; Liu Z.2
2013-05-01
Source PublicationJournal of Banking and Finance
ISSN03784266
Volume37Issue:5Pages:1777-1786
Abstract

We propose a new threshold-pre-averaging realized estimator for the integrated co-volatility of two assets using non-synchronous observations with the simultaneous presence of microstructure noise and jumps. We derive a noise-robust Hayashi-Yoshida estimator that allows for very general structure of jumps in the underlying process. Based on the new estimator, different aspects and components of co-volatility are compared to examine the effect of jumps on systematic risk using tick-by-tick data from the Chinese stock market during 2009-2011. We find controlling for jumps contributes significantly to the beta estimation and common jumps mostly dominate the jump's effect, but there is also evidence that idiosyncratic jumps may lead to significant deviation. We also find that not controlling for noise and jumps in previous realized beta estimations tend to considerably underestimate the systematic risk. © 2013 Elsevier B.V.

KeywordCo-jump Co-volatility High-frequency Finance Idiosyncratic Jumps Itô Semi-martingale Microstructure Noise Non-synchronous Trading
DOI10.1016/j.jbankfin.2013.01.024
URLView the original
Indexed BySCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance ; Economics
WOS IDWOS:000317167600036
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Citation statistics
Cited Times [WOS]:7   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionDEPARTMENT OF MATHEMATICS
Affiliation1.Xiamen University
2.Universidade de Macau
Recommended Citation
GB/T 7714
Wang K.,Liu J.,Liu Z.. Disentangling the effect of jumps on systematic risk using a new estimator of integrated co-volatility[J]. Journal of Banking and Finance,2013,37(5):1777-1786.
APA Wang K.,Liu J.,&Liu Z..(2013).Disentangling the effect of jumps on systematic risk using a new estimator of integrated co-volatility.Journal of Banking and Finance,37(5),1777-1786.
MLA Wang K.,et al."Disentangling the effect of jumps on systematic risk using a new estimator of integrated co-volatility".Journal of Banking and Finance 37.5(2013):1777-1786.
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