Do idiosyncratic jumps matter?

• 成果类型: Article
• 署名作者: Kapadia, Nishad; Zekhnini, Morad
• 署名单位: Tulane University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.08.014
• 发表日期: 2019
• 页码: 666-692
• 关键词: Idiosyncratic jumps; idiosyncratic risk; Limits to arbitrage

摘要

We show that idiosyncratic jumps are a key determinant of mean stock returns from both an ex post and ex ante perspective. Ex post, the entire annual average return of a typical stock accrues on the four days on which its price jumps. Ex ante, idiosyncratic jump risk earns a premium: a value-weighted weekly long-short portfolio that buys (sells) stocks with high (low) predicted jump probabilities earns annualized mean returns of 9.4% and four-factor alphas of 81%. This strategy's returns are larger when there are greater limits to arbitrage. These results are consistent with investor aversion to idiosyncratic jump risk. (C) 2018 Elsevier B.V. All rights reserved.