Impacts of implied volatility on stock price realized jumps

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Abstract

This paper investigates the impact of ex ante implied volatility on stock price realized jumps. In particular, it examines how the different behaviors of informed and noise traders affect stock price jumps. We find that ex ante implied volatility interacts with the level of information quality for a stock when leading realized jumps, and that the direction of the relation changes across the states of the business cycle. We also document an asymmetric impact from ex ante implied volatility on price jumps across stocks with different degrees of information-based trading activity.

Original languageEnglish
Pages (from-to)622-630
Number of pages9
JournalEconomic Systems
Volume40
Issue number4
DOIs
StatePublished - 1 Dec 2016

Keywords

  • Implied volatility
  • Information risk
  • Stock price jump

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