Continuous and Jump Betas : Implications for Portfolio Diversification (Evidence from Indonesia Stock Market)

DOI

10.2991/icbmr-17.2017.11How to use a DOI?

Keywords

high frequency data, continuous and jump beta, systematic risk,

Abstract

This study aimed to investigate the difference of CAPM beta for both continuous and jump components for constituent stocks market using Indonesia Stock Exchange (JKSE) and overall 45 the most active stocks from the LQ45 index for six months' period from March 2017 to August 2017. The study decomposed the time-varying beta for stocks into beta for continuous and discontinuous systematic risk. This study employed 5 min interval data set from Thompson Reuters, and the findings show that there is significance jumps components in Indonesia stock market (JKSE). However, there was no significance jumps component in individual stock market in LQ 45. We estimate individual beta small size companies have larger beta than large size companies with the highest beta is 0.00004% and the average beta is 0.0000132%. Furthermore, low volatility firms have smaller beta with the average 0.000056% as opposed to high volatility firms with the average 0,0000171%. This research reveals that continuous volatility in stock market is 0.0000123% and jump volatility is 0,0000434%. We also investigate that diverfication effect can be employed to decrease the total realized volatility by simply adding the number of stocks. Whether there is a similar pattern for continuous and jump systematic risk could not be found, but it was discovered in this study that investor can omitted jump systematic risk when they have at least 10 stocks in their portfolio.

Copyright

© 2017, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Download article (PDF)

TY  - CONF
AU  - Usman Arief
AU  - Zaafri Ananto Husodo
PY  - 2017/11
DA  - 2017/11
TI  - Continuous and Jump Betas : Implications for Portfolio Diversification (Evidence from Indonesia Stock Market)
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2017)
PB  - Atlantis Press
SP  - 115
EP  - 125
SN  - 2352-5428
UR  - https://doi.org/10.2991/icbmr-17.2017.11
DO  - 10.2991/icbmr-17.2017.11
ID  - Arief2017/11
ER  -