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Jump Tail Dependence in the Chinese Stock Market

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  • Sophia Zhengzi Li
  • Hao Wang
  • Hua Zhao

Abstract

The article examines the characteristics and implications of jump tail dependence in the Chinese stock market with high-frequency data. The results indicate that jumps contribute significantly to tail dependence between individual stocks and the aggregate market. Jumps are more tail dependent than raw returns and account for an average of 17 percent of the daily tail-dependence coefficient. We also find that jump tail dependence is asymmetric and substantially stronger in the lower tail than in the upper tail. Ignoring jump tail dependence may lead to underestimation of risks and produce inaccurate conclusions about the tail neutrality of a portfolio.

Suggested Citation

  • Sophia Zhengzi Li & Hao Wang & Hua Zhao, 2016. "Jump Tail Dependence in the Chinese Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(10), pages 2379-2396, October.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:10:p:2379-2396
    DOI: 10.1080/1540496X.2015.1073988
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    Cited by:

    1. Kutan, Ali M. & Shi, Yukun & Wei, Mingzhe & Zhao, Yang, 2018. "Does the introduction of index futures stabilize stock markets? Further evidence from emerging markets," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 183-197.
    2. Duan, Kun & Ren, Xiaohang & Wen, Fenghua & Chen, Jinyu, 2023. "Evolution of the information transmission between Chinese and international oil markets: A quantile-based framework," Journal of Commodity Markets, Elsevier, vol. 29(C).

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