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Price dynamics of individual stocks: Jumps and information

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  • Xiao, Yuewen
  • Zhao, Jing

Abstract

This study examines individual stocks’ price dynamics by separating continuous and discontinuous price innovations and testing their mechanisms in response to information. Among the 1249 NYSE-listed stocks in our sample, the price data of 642 (607) stocks are better fitted by a pure diffusion (jump-diffusion) model. For more than 93% of the 1249 stocks, their diffusion components vary with the proxies of daily information-based trading. However, only 94 out of 607 jump-diffusion stocks have jump components varying with these proxies. Our findings demonstrate significant heterogeneity in individual stocks’ price dynamics and advocate the importance of model selection.

Suggested Citation

  • Xiao, Yuewen & Zhao, Jing, 2021. "Price dynamics of individual stocks: Jumps and information," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319309390
    DOI: 10.1016/j.frl.2019.101404
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    More about this item

    Keywords

    Stock price; Pure diffusion model; Jump-diffusion model; Information-based trading;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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