Understanding co-jumps in financial markets
|Author:||Mgr. Richard Thoma|
|Year:||2016 - summer|
|Leaders:|| doc. PhDr. Jozef Baruník Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This thesis focuses on impact of jumps and simultaneous jumps (co-jumps) in asset prices on future
volatility. Our main contribution to the empirical literature lies in the use of panel Heterogeneous
Autoregressive (HAR) model that allows us to obtain average effect of jumps for both the portfolio of
29 U.S. stocks and 8 individual market sectors our stocks belong to. On top of that we investigate the
effect of sign for both jumps and co-jumps. The estimation results indicate that the impact of jumps
on future volatility is positive whereas for co-jumps it is negative. We also document tendency of
downward jumps and co-jumps to be followed by increase in volatility and that upward jumps and
co-jumps are followed by decrease in volatility. Finally, results for individual sectors reveal that
estimated effects vary across industries - for cyclical sectors volatility is in general more sensitive to
negative jumps and less sensitive to positive jumps than for defensive sectors.