Identifying new classes of financial price jumps with wavelets

Research output: Contribution to journalArticlepeer-review

Abstract

We introduce an unsupervised classification framework that leverages a multiscale wavelet representation of time-series and apply it to stock price jumps. In line with previous work, we recover the fact that time-asymmetry of volatility is the major feature that separates exogenous, news-induced jumps from endogenously generated jumps. Local mean-reversion and trend are found to be two additional key features, allowing us to identify new classes of jumps. Using our wavelet-based representation, we investigate the endogenous or exogenous nature of cojumps, which occur when multiple stocks experience price jumps within the same minute. Perhaps surprisingly, our analysis suggests that a significant fraction of cojumps result from an endogenous contagion mechanism.

Original languageEnglish
Article numbere2409156121
JournalProceedings of the National Academy of Sciences of the United States of America
Volume122
Issue number6
DOIs
Publication statusPublished - 11 Feb 2025

Keywords

  • classification
  • cojumps
  • price jumps
  • reflexivity
  • wavelets

Fingerprint

Dive into the research topics of 'Identifying new classes of financial price jumps with wavelets'. Together they form a unique fingerprint.

Cite this