Abstract
The existing literature overlooks the different responses of the stock market to jump risk during high and low volatility periods. We examine the impact of positive and negative jumps on China's composite index and sector index volatilities across various volatility regimes from January 4, 2010 to June 30, 2023 based on 5-min high-frequency data and quantile regression. The results indicate that the asymmetry of positive and negative jumps in the emerging sectors is not significant in the high quantiles, but is significant in the middle and low quantiles, compared with the composite index and traditional sectors. The volatility change driven by the negative jump of most emerging sectors indices exhibits a clear ‘J’ shaped distribution. Moreover, COVID-19 has weakened the positive relationship between negative jumps and volatility in traditional sectors. This work alerts risk managers to focus on negative jump risks when markets are in periods of high volatility.
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