Jump Risk of Presidential Election: Evidence from Taiwan Stock and Foreign Exchange Markets

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Title:	Jump Risk of Presidential Election: Evidence from Taiwan Stock and Foreign Exchange Markets
Authors:	Hung, Jui-cheng;Jiang, Shi-jie;Chiu, Chien-liang
Contributors:	淡江大學財務金融學系
Date:	2007-07
Issue Date:	2011-10-24 10:31:49 (UTC+8)
Publisher:	Routledge
Abstract:	This article employs jump-diffusion models, including the ARJI model and the GARCH-jump model, to examine jump intensity and volatility of Taiwan stock and foreign exchange markets during a Presidential election period. The empirical results indicate that, firstly, the ARJI model fits data better than the GARCH-jump model. Secondly, the Presidential election events enhance the jump intensity of both markets and the jump-induced variance is higher than diffusion-induced variance. It reveals the importance of the discrete jump process during a Presidential election period, and might provide some implications for option pricing or hedging strategy. Due to the intervention of the Central Bank in the foreign exchange market during a Presidential election period, the results indicate that jump intensity and volatility of jump size are more moderate.
Relation:	Applied Economics 39(17), pp.2231-2240
DOI:	10.1080/00036840600749458
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article

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