Abstract
This paper discusses the statistical properties of jump-diffusion processes and reports on parameter estimates for the DAX stock index and 48 German stocks with traded options. It is found that a Poisson-type jump-diffusion process can explain the high levels of kurtosis and skewness of observed return distributions of German stocks. Furthermore, we demonstrate that the return dynamics of the DAX include a statistically significant jump component except for a few sample subperiods. This finding is seen to be inconsistent with asset pricing models assuming that the jump component of the stock's return is unsystematic and diversifiable in the market portfolio.
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This work was partially supported by the Deutsche Forschungsgemeinschaft, Schwerpunktprogramm ‘Empirische Kapitalmarktforschung’.
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Beinert, M., Trautmann, S. Jump-diffusion models of German stock returns. Statistical Papers 32, 269–280 (1991). https://doi.org/10.1007/BF02925502
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DOI: https://doi.org/10.1007/BF02925502