Sluggish news reactions: A combinatorial approach for synchronizing stock jumps

RePEc Short ID: pne3
ORCID iD: 0000-0003-2852-9419

Bouamara, Nabil; Boudt, Kris; Laurent, Sebastien; Neely, Christopher J.

doi:10.20955/wp.2024.006

Working Paper

Sluggish news reactions: A combinatorial approach for synchronizing stock jumps

Abstract: Stock prices often react sluggishly to news, producing gradual jumps and jump delays. Econometricians typically treat these sluggish reactions as microstructure effects and settle for a coarse sampling grid to guard against them. Synchronizing mistimed stock returns on a fine sampling grid allows us to better approximate the true common jumps in related stock prices.

Keywords: asynchronicity; cojumps; high-frequency data; microstructure noise; realized covariance; rearrangement;

JEL Classification: C02; C58; G11; G14;

https://doi.org/10.20955/wp.2024.006