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Sophia Li
Bio sketch: Sophia Zhengzi Li is a doctoral candidate in Economics at Duke University. She is expected to receive her Ph.D. degree from Duke in May 2013.
Her research interests include Financial Econometrics, Asset Pricing, Market Microstructure and Computational Statistics. Her work has been published in the Journal of Econometrics and Electronic Journal of Statistics, and has been presented at various conferences and research institutes.
Her teaching interests include Financial Markets and Investment, High-Frequency Finance, Asset Pricing and Derivatives, Econometrics and Statistics.
Abstract: Aggregate stock market returns are naturally categorized as either small or large movements. In the continuous-time model setup, we can formally identify these movements as continuous or discontinuous (jump). Using a large, novel, high-frequency dataset, I investigate how individual stocks respond to these two different market changes. I also explore whether the different systematic risks associated with those two movements are priced in the cross-section of expected stock returns. I show that the cross-section of expected stock returns reflects a risk premium for the systematic discontinuous risk but not for the systematic continuous risk. An investment strategy that goes long stocks in the highest discontinuous beta decile and shorts stocks in the lowest discontinuous beta decile produces average excess returns of 17% per annum. I estimate that the risk premium for the discontinuous risk is approximately 3% per annum after controlling for the usual firm characteristic variables including size, book-to-market ratio, momentum, idiosyncratic volatility, coskewness, cokurtosis, realized-skewness, realized-kurtosis, maximum daily return, and illiquidity.
For more information about the speaker please visit her web site