Jump Diffusion Phenomenon, Realized Jumps and Stock Returns: Panel Quantile Regression Analysis of Aggregate Market and Sectors
Journal Title: Pakistan Journal of Economic Studies - Year 2021, Vol 4, Issue 2
Abstract
Financial crisis and uncertain dynamics of stock market caused the highly volatile trend of stock prices and returns. These volatility conditions may affect investors and financial managers severely. Therefore, it is necessary to find comprehensive framework to understand the dynamics of stock return volatility. This study is aimed at examination of dynamics of jump diffusion phenomenon of stock return volatility. Comparative insight of aggregate stock market and sectoral stock returns in response with diffusive risk, jump risk, return asymmetry and total volatility measures of jump diffusion are provided in this research. This research uses panel data quantile regression with fixed effect estimates for statistical results. The results indicate that non-linear events with proxy results of realized jumps have significant negative impact on aggregate stock market return. Yet, sectoral stock returns show mixed of positive and negative linkages with realized jumps. Jump diffusion components of volatility results confirmed non-linear positive and negative impact on sectoral stock returns of various sectors.
Authors and Affiliations
Rehan Bin Tariq, Muhammad Abbas, Abdul Rashid
Keywords
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