Working Paper Revision
Sluggish news reactions: A combinatorial approach for synchronizing stock jumps
Abstract: Stock prices often react sluggishly to news, producing gradual and delayed jumps. Econometricians typically treat these sluggish reactions as microstructure effects and settle for a coarse sampling grid to guard against them. We introduce new methods to synchronize mistimed stock returns on a fine sampling grid that allow us to better approximate the true common jumps in the efficient prices of related stocks in an application to Dow 30 data. The synchronized jumps produce better jump covariance estimates and estimates of the realized jump betas with better forecasting power, and superior trading rule performance.
JEL Classification: C02; C58; G11; G14;
https://doi.org/10.20955/wp.2024.006
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https://doi.org/10.20955/wp.2024.006
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2025-10-30
Number: 2024-006
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- Working Paper Revision (2025-10-30) : You are here.
- Working Paper Original (2024-03-26) : Sluggish news reactions: A combinatorial approach for synchronizing stock jumps