Influence Of Jump Risk And Informed Trading Risk To Asset Excessive Returns

In this paper,we consider the mean and standard deviation and arrival rate of realized jump volatility,as well as the volume synchronized probability of informed trading(VPIN)of non-parametric high frequency market.We built a new model based on assets jump and market jump and the volume synchronized probability of informed trading to study the relationship between those factors and excess returns.We divide the S&P 100 stocks of 5 years into 25 portfolio by their size and book-to-market ratio and use these data as our analysis sample.We fund weak correlation between jump components and VPIN,the results of time series analysis show that jump component have significant influence to different market size and book-to-market ratio portfolio and VPIN has a significant effect on the portfolio of small and medium-sized assets,while only for few portfolios that market jump components have a significant effect.The cross-sectional analysis of portfolio’s excess return shows that the jump components and VPIN have a positive significant premium,and market jump component has no significant explanatory power;When we add size and book-to-market ratios factor into our regression model,we fund jump components and VPIN still have significant explanatory power,the results support the hypothesis that high-frequency jump tail risk and informed trading information risk have robust explanatory effect on the risk premium of stock portfolio.