Identifying new classes of financial price jumps with wavelets

We introduce an unsupervised classification framework that leverages a multiscale wavelet representation of time-series and apply it to stock price jumps. In line with previous work, we recover the fact that time-asymmetry of volatility is the major feature that separates exogenous, news-induced jumps from endogenously generated jumps. Local mean-reversion and trend are found to be two additional key features, allowing us to identify new classes of jumps. Using our wavelet-based representation, we investigate the endogenous or exogenous nature of cojumps, which occur when multiple stocks experience price jumps within the same minute. Perhaps surprisingly, our analysis suggests that a significant fraction of cojumps result from an endogenous contagion mechanism.

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Publication Details

Journal
Proceedings of the National Academy of Sciences
Published
2025-02-07
DOI
https://doi.org/10.1073/pnas.2409156121
Citations
1
Primary Topic
Complex Systems and Time Series Analysis
Type
article
Field-Weighted Citation Impact
3.13
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article

Identifying new classes of financial price jumps with wavelets

Cécilia Aubrun, Michael Benzaquen, Rudy Morel, Jean‐Philippe Bouchaud
1 citations
Proceedings of the National Academy of Sciences
Complex Systems and Time Series Analysis
3.13
article

Identifying new classes of financial price jumps with wavelets

Cécilia Aubrun, Michael Benzaquen, Rudy Morel, Jean‐Philippe Bouchaud
article en
1 citations

Abstract

We introduce an unsupervised classification framework that leverages a multiscale wavelet representation of time-series and apply it to stock price jumps. In line with previous work, we recover the fact that time-asymmetry of volatility is the major feature that separates exogenous, news-induced jumps from endogenously generated jumps. Local mean-reversion and trend are found to be two additional key features, allowing us to identify new classes of jumps. Using our wavelet-based representation, we investigate the endogenous or exogenous nature of cojumps, which occur when multiple stocks experience price jumps within the same minute. Perhaps surprisingly, our analysis suggests that a significant fraction of cojumps result from an endogenous contagion mechanism.

Proceedings of the National Academy of SciencesVol. 122(6)
École Polytechnique (FR), École Normale Supérieure - PSL (FR), Laboratoire d'Hydrodynamique de l'École polytechnique (FR), Académie de Paris (FR), Flatiron Health (United States) (US), Flatiron Institute (US), Capital Fund Management (France) (FR)
Openalex Percentile: Top 10%
Complex Systems and Time Series Analysis
3.13
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