Cross-company jump spillover and the role of news.

ABSTRACT

We study how jumps spillover and the cross-company impact of firm-specific unscheduled news on jumps between economic sectors. To this end, we employ high-frequency data of 220 constituents of the Russell 3000 index equally divided into eleven sectors. Using conditional jump probabilities, we find that jump spillover is a pervasive phenomenon enhanced when jumps cluster and that firm-specific news, especially from the financial sector, boosts the jump spillover effect. Volatility following spillover jumps is significantly higher than usual, except when firm-specific news is released around the jump provoking the spillover.