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Sign realized jump risk and the cross-section of stock returns: Evidence from China's stock market

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  • Youcong Chao
  • Xiaoqun Liu
  • Shijun Guo

Abstract

Using 5-minute high frequency data from the Chinese stock market, we employ a non-parametric method to estimate Fama-French portfolio realized jumps and investigate whether the estimated positive, negative and sign realized jumps could forecast or explain the cross-sectional stock returns. The Fama-MacBeth regression results show that not only have the realized jump components and the continuous volatility been compensated with risk premium, but also that the negative jump risk, the positive jump risk and the sign jump risk, to some extent, could explain the return of the stock portfolios. Therefore, we should pay high attention to the downside tail risk and the upside tail risk.

Suggested Citation

  • Youcong Chao & Xiaoqun Liu & Shijun Guo, 2017. "Sign realized jump risk and the cross-section of stock returns: Evidence from China's stock market," PLOS ONE, Public Library of Science, vol. 12(8), pages 1-14, August.
    • Handle: RePEc:plo:pone00:0181990
    DOI: 10.1371/journal.pone.0181990
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    2. Saranya Kshatriya & Krishna Prasanna, 2020. "Unveiling Contemporaneous Relations Between Jump Risk and Cross Section of Stock Returns," International Review of Finance, International Review of Finance Ltd., vol. 20(3), pages 581-604, September.
    3. Aslam, Faheem & Mohmand, Yasir Tariq & Aziz, Saqib & Ouenniche, Jamal, 2020. "A complex networks based analysis of jump risk in equity returns: An evidence using intraday movements from Pakistan stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
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    5. Kamaldeen Ibraheem Nageri, 2019. "Evaluating Voltality Persistence Of Stock Returtn In The Pre And Post 2008-2009 Financial Meltdown," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(3), pages 75-94.

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