We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Jump risk and cross section of stock returns: evidence from China's stock market.
- Authors
Zhou, Haigang; Zhu, John
- Abstract
Various studies have confirmed the existence of jumps in different financial markets. However, there is sparse theoretical or empirical effort to examine the dynamic relation between jump risk and cross-sectional expected stock returns. We follow a stylized SDF-based diffusion-jump model to examine its testable implications about the relation between cross-section expected excess returns and variations in jump intensities across stocks. The zero-cost portfolio, exploiting the return spreads between the top and bottom decile portfolios formed on jump intensity, could earn an annualized return as high as 24% with an annualized Sharpe ratio of 1.67. A Fama-MacBeth test shows that stock excess returns monotonically decrease in jump intensity even after controlling for other common risk factors.
- Subjects
CHINA; STOCK exchanges; RATE of return; FINANCIAL markets; CROSS-sectional method; FINANCIAL risk management; MARKET volatility
- Publication
Journal of Economics & Finance, 2011, Vol 35, Issue 3, p309
- ISSN
1055-0925
- Publication type
Article
- DOI
10.1007/s12197-009-9097-z