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Discrete Dynamics in Nature and Society
Volume 2014, Article ID 721635, 13 pages
Research Article

Realized Jump Risk and Equity Return in China

1School of Economics and The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China
2School of Economics, Xiamen University, Xiamen, Fujian 361005, China

Received 2 March 2014; Revised 10 May 2014; Accepted 11 May 2014; Published 23 June 2014

Academic Editor: Fenghua Wen

Copyright © 2014 Guojin Chen et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We utilize the realized jump components to explore a new jump (including nonsystematic jump and systematic jump) risk factor model. After estimating daily realized jumps from high-frequency transaction data of the Chinese A-share stocks, we calculate monthly jump size, monthly jump standard deviation, and monthly jump arrival rate and then use those monthly jump factors to explain the return of the following month. Our empirical results show that the jump tail risk can explain the equity return. For the large capital-size stocks, large cap stock portfolios, and index, one-month lagged jump risk factor significantly explains the asset return variation. Our results remain the same even when we add the size and value factors in the robustness tests.