Sluggish news reactions: A combinatorial approach for synchronizing stock jumps

Author:

Nabil Bouamara, Kris Boudt, Sébastien Laurent, Christopher J. Neely

Keyword:

Economics, Econometrics, Econometrics (econ.EM)

journal:

date:

2023-09-26 16:00:00

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 automatically detect noisy jumps and better approximate the true common jumps in related stock prices.

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