Abstract: Based on jump regression model, this paper estimates jump betas, proposes positive and negative jump regression models, and studies systematic jump risk in China's stock market. The result shows that the jump regression model fits well, market jumps have significant impact on individual stock jumps, and there are systematic jump risks in China's stock market. After jump beta is decomposed into positive and negative jump betas, it is found that the stock portfolio returns increase monotonically in line with the decreasing of positive jump beta, and positive jump beta can reflect the difference of stock portfolio more effectively. Moreover, the jump beta is negatively correlated with the future portfolio returns, and the portfolio of less systematic jump risk tends to get higher returns. The hedging portfolio with model-jump-beta can obtain significantly positive excess returns adjusted by three-factor model.

Key words: jump regression, jump beta, investment portfolio