Volatility Jump Detection in Thailand Stock Market

Duangin, Saowaluk; Yamaka, Woraphon; Sirisrisakulchai, Jirakom; Sriboonchitta, Songsak

doi:10.1007/978-3-319-75429-1_37

“…Over the past decade, integrated volatility and jumps in asset pricing have attracted particular attention in the literature of finance, and their importance is prominent (Brownlees et al 2020;Buncic and Gisler 2017). As per the efficient market hypothesis (EMH), the stock market responds to the arrival of new information, leading to changes in returns and volatility of the stock market prices (Duangin et al 2018). However, sometimes there are abnormal movements or large discontinuous changes in stock prices, which are infrequent but large; these extreme movements are known as jumps, associated with the arrival of unexpected new information (Ferriani and Zoi 2020;Jiang and Zhu 2017;Sun and Gao 2020).…”

Section: Introductionmentioning

confidence: 99%

Do Jumps Matter in Both Equity Market Returns and Integrated Volatility: A Comparison of Asian Developed and Emerging Markets

Zada

¹

,

Hassan

²

,

Wong

³

2021

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In this paper, we examine whether jumps matter in both equity market returns and integrated volatility. For this purpose, we use the swap variance (SwV) approach to identify monthly jumps and estimated realized volatility in prices for both developed and emerging markets from February 2001 to February 2020. We find that jumps arise in all equity markets; however, emerging markets have more jumps relative to developed markets, and positive jumps are more frequent than negative jumps. In emerging markets, the markets with average volatility earn higher returns during jump periods; however, highly volatile markets earn higher returns during jump periods in developed markets. Furthermore, markets with low continuous returns and high volatility are more adversely affected during periods of negative jumps. The average ratio of jump variations to total variation shows considerable variations due to jumps. Integrated volatility is high during periods of negative jumps, and this pattern is consistent in both developed and emerging markets. Moreover, the peak volatility of stock markets is observed during periods of crises. The implication of this study is useful in the asset pricing model, risk management, and for individual investors and portfolio managers for both developed and emerging markets.

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“…The importance of jumps is illustrated in some early studies, including by Aït-Sahalia ( 2004), Aït-Sahalia and Hurd (2015), Amaya and Vasquez (2011), Nguyen and Prokopczuk (2019), Buncic and Gisler (2017), Carr and Wu (2003), Duangin et al (2018), Dutta et al (2020), Eraker et al (2003, Ferriani and Zoi (2020), Jiang and Oomen (2008), Jiang and Yao (2013), Jiang and Zhu (2017), Pan (2002), andWright andZhou (2009). Pan (2002) shows evidence that investors demand a higher risk premium for taking the risk associated with price jumps.…”

Section: Introductionmentioning

confidence: 99%

“…Over the past decade, integrated volatility and jumps in asset pricing have attracted particular attention in the literature of finance, and their importance is prominent (Brownlees et al 2020;Buncic and Gisler 2017). As per the efficient market hypothesis (EMH), the stock market responds to the arrival of new information, leading to changes in returns and volatility of the stock market prices (Duangin et al 2018). However, sometimes there are abnormal movements or large discontinuous changes in stock prices, which are infrequent but large; these extreme movements are known as jumps, associated with the arrival of unexpected new information (Ferriani and Zoi 2020;Jiang and Zhu 2017;Sun and Gao 2020).…”

Section: Introductionmentioning

confidence: 99%