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Realized Jump Risk and Equity Return in China

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  • Guojin Chen
  • Xiaoqun Liu
  • Peilin Hsieh
  • Xiangqin Zhao

Abstract

We utilize the realized jump components to explore a new jump (including nonsystematic jump and systematic jump) risk factor model. After estimating daily realized jumps from high-frequency transaction data of the Chinese A-share stocks, we calculate monthly jump size, monthly jump standard deviation, and monthly jump arrival rate and then use those monthly jump factors to explain the return of the following month. Our empirical results show that the jump tail risk can explain the equity return. For the large capital-size stocks, large cap stock portfolios, and index, one-month lagged jump risk factor significantly explains the asset return variation. Our results remain the same even when we add the size and value factors in the robustness tests.

Suggested Citation

  • Guojin Chen & Xiaoqun Liu & Peilin Hsieh & Xiangqin Zhao, 2014. "Realized Jump Risk and Equity Return in China," Discrete Dynamics in Nature and Society, Hindawi, vol. 2014, pages 1-13, June.
    • Handle: RePEc:hin:jnddns:721635
    DOI: 10.1155/2014/721635
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    Cited by:

    1. Liu, Xiaoqun & Zhang, Yuchen & Tian, Mengqiao & Chao, Youcong, 2023. "Financial distress and jump tail risk: Evidence from China's listed companies," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 316-336.

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