A Study on the Compensation Characteristic of Jump Risk

Abstract

Abstract:

This paper constructs daily, weekly and monthly jump risk factors with intraday jumps of 200 individual stocks selected from HS300 index based on data efficiency, and then analyzes their relation with future real return. We find a time-varying jump risk compensation structure: As sample length increases, momentum trading gradually decreases and price reversal becomes significant. Further study finds that high continuous volatility is associated with high jump risk. Continuous volatility is positively and significantly correlated with future real return only when it is low, and when it rises high, only jump risk is significant, and compensated with a stable structure: Negative jumps induce sell-losers effect while price reverses after positive jumps.

Key words: intraday price jumps, momentum trading, price reversal

Wan Die, Yang Xiaoguang. A Study on the Compensation Characteristic of Jump Risk[J]. , 2015, 27(9): 14-28.

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