Federal Reserve Bank of St. Louis
Systematic Cojumps, Market Component Portfolios and Scheduled Macroeconomic Announcements
This study provides evidence of common bivariate jumps (i.e., systematic cojumps) between the market index and style-sorted portfolios. Systematic cojumps are prevalent in book-to-market portfolios and hence, their risk cannot easily be diversified away by investing in growth or value stocks. Nonetheless, large-cap firms have less exposure to systematic cojumps than small-cap firms. Probit regression reveals that systematic cojump occurrences are significantly associated with worse-than-expected scheduled macroeconomic announcements, especially those pertaining to the Federal Funds target rate. Tobit regression shows that Federal Funds news surprises are also significantly related to the magnitude of systematic cojumps.
Cite this item
Kam Fong Chan & Robert G. Bowman & Christopher J. Neely, Systematic Cojumps, Market Component Portfolios and Scheduled Macroeconomic Announcements, Federal Reserve Bank of St. Louis, Working Papers 2017-11, 26 Apr 2017.
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Keywords: Systematic cojumps; Scheduled macroeconomic announcements; Market component portfolios; Federal Funds rate.
This item with handle RePEc:fip:fedlwp:2017-011
is also listed on EconPapers
For corrections, contact Anna Oates ()