Roughing up beta: Continuous versus discontinuous betas and the cross section of expected stock returns

Tim Bollerslev, Sophia Zhengzi Li, Viktor Todorov

Research output: Contribution to journalArticlepeer-review

45 Scopus citations

Abstract

We investigate how individual equity prices respond to continuous and jumpy market price moves and how these different market price risks, or betas, are priced in the cross section of expected stock returns. Based on a novel high-frequency data set of almost 1,000 stocks over two decades, we find that the two rough betas associated with intraday discontinuous and overnight returns entail significant risk premiums, while the intraday continuous beta does not. These higher risk premiums for the discontinuous and overnight market betas remain significant after controlling for a long list of other firm characteristics and explanatory variables.

Original languageEnglish (US)
Pages (from-to)464-490
Number of pages27
JournalJournal of Financial Economics
Volume120
Issue number3
DOIs
StatePublished - Jun 1 2016
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Keywords

  • Cross-sectional return variation
  • High-frequency data
  • Jump betas
  • Market price risks

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