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Stock price jumps: news and volume play a minor role

Author

Listed:
  • Armand Joulin

    (CFM)

  • Augustin Lefevre

    (CFM)

  • Daniel Grunberg

    (CFM)

  • Jean-Philippe Bouchaud

    (CFM)

Abstract

In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and amplitude of price jumps. We find that the volatility patterns around jumps and around news are quite different: jumps are followed by increased volatility, whereas news tend on average to be followed by lower volatility levels. The shape of the volatility relaxation is also markedly different in the two cases. Finally, we provide direct evidence that large transaction volumes are_not_ responsible for large price jumps. We conjecture that most price jumps are induced by order flow fluctuations close to the point of vanishing liquidity.

Suggested Citation

  • Armand Joulin & Augustin Lefevre & Daniel Grunberg & Jean-Philippe Bouchaud, 2008. "Stock price jumps: news and volume play a minor role," Papers 0803.1769, arXiv.org.
    • Handle: RePEc:arx:papers:0803.1769
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    References listed on IDEAS

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    1. Olivier Guedj & Jean-Philippe Bouchaud, 2005. "Experts' Earning Forecasts: Bias, Herding And Gossamer Information," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 8(07), pages 933-946.
    2. Ray C. Fair, 2002. "Events That Shook the Market," The Journal of Business, University of Chicago Press, vol. 75(4), pages 713-732, October.
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