An Empirical Investigation of Intraday Jumps and Cojumps in US Equities

Abstract

Using the intraday jump test of Andersen et al. (2007b) (ABD) and correcting for the intraday volatility pattern, the empirical properties of jumps and cojumps in 72 US equities are examined. The intraday nature of the ABD test allows an examination of both the statistical (the frequency, size and direction) and economic (association with systematic news) properties of jumps and cojumps. Including a proxy for the S&P 500 market index allows two cojump categories to be analysed: systematic and idiosyncratic cojumps. Jumps are found to be frequent and sizes are largely symmetric. No evidence of a link between the release of macroeconomic news at 10:00:00 EST time and the arrival of jumps/cojumps is found. In excess of 60% of jumps are found to be involved in a cojump with the majority of these being of an idiosyncratic nature. However, idiosycncratic cojumps and singular jumps (those jumps not involved in a cojump) are easily diversified away by holding portfolios of moderate size. No significant differences are found to exist between the properties of systematic, idiosyncratic and singular cojump/jumps; all appear to be symmetrically distributed, show no deterministic intraday pattern and do not significantly differ in their size.