Friday March 20 2015
Scuola Normale Superiore
Dipartimento di Economia Politica e Statistica – Università di Siena
The simultaneous occurrence of jumps in several stocks (multi-jumps) can be associated to major nancial news, is correlated with sudden spikes of the variance risk premium, and determines an increase in the stock variances and correlations which signicantly deteriorates the diversication potential of asset allocation. The latter evidence implies a reduction in the demand of stocks by an aware risk-averse investor. These facts can be easily overlooked by the usage of standard univariate jump statistics, which just lack sucient power. They are instead revealed in a clearly cut way by using a novel test based on smoothed estimators of the integrated variance ofindividual stocks.
Joint work with Massimiliano Caporin and Aleksey Kolokolov.