Department of Economics and Business Economics

Jumps and Betas: A New Framework for Disentangling and Estimating Systematic Risks

Research output: Working paperResearch

  • School of Economics and Management
We provide a new theoretical framework for disentangling and estimating sensitivity
towards systematic diffusive and jump risks in the context of factor pricing models. Our
estimates of the sensitivities towards systematic risks, or betas, are based on the notion
of increasingly finer sampled returns over fixed time intervals. In addition to establish-
ing consistency of our estimators, we also derive Central Limit Theorems characterizing
their asymptotic distributions. In an empirical application of the new procedures using
high-frequency data for forty individual stocks and an aggregate market portfolio, we
find the estimated diffusive and jump betas with respect to the market to be quite dif-
ferent for many of the stocks. Our findings have direct and important implications for
empirical asset pricing finance and practical portfolio and risk management decisions.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages35
Publication statusPublished - 2007

    Research areas

  • Factor models, systematic risk, common jumps, high-frequency data, realized variation

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ID: 10569800