İşletme Fakültesi Brown Bag Seminer Serisi / S. Mehmet Özsoy
Orman Sk Nişantepe Mahallesi, Çekmeköy, İstanbul34794
Tarih: 19 Aralık 2019 - Perşembe
Yer: AB2, Toplantı Odası345
Title: Commonality in International Equity Jump Risk
Presenter: S. Mehmet Ozsoy (joint work with Biliana Guner)
Abstract: We study jump risk in international equity index returns, using a large sample of emerging and developed markets. Our modeling framework endogenously differentiates between jumps and normal variation in returns. The expected number of jumps we compute for each country and period is our proxy for jump risk. Our research fills an important gap in the understanding of jump risk in international equity returns. Much of previous international equity research has focused on analyzing realized jumps. In contrast, jump risk reflects market agents’ expectations and drives a premium in the international equity markets, regardless of a jump occurs or not. Our analysis yields interesting insights, which are all new to the literature. International jump risks vary across time and countries, in line with identifiable macroeconomic and financial market events. Yet there is a strong commonality: The first principal component of the jump risks accounts for 62 percent of the common variation and has a correlation of 0.73 with the VIX index. Commonality of jump risks has been increasing through time. Finally, countries with high exposure to the common component in jump risks have low expected returns. This result can be understood in terms of high-exposure countries providing a hedge against expected jump events.
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