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;

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Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2024-03-26

Number: 2024-006