Asset Return Stylized Facts and the Role of Jumps

Summary

The document reviews a commonly cited set of empirical regularities in asset returns, including heavy tails, volatility clustering, slow decay in the autocorrelation of absolute returns, leverage effects, and relationships between volume and volatility. It asks whether researchers have proposed additional stylized facts since the original compilation and a later reference work.

The response highlights jumps in both prices and volatility as an important candidate. It says jumps help explain the distributions of volatility and price changes and matter for option pricing, citing a research paper as a reference. The note does not summarize that paper's methods or evidence, nor does it establish that jumps have been formally added to a consensus list; the suggestion is a brief answer rather than a systematic review.

Key ideas

• Common asset return regularities include heavy tails and volatility clustering.
• Price and volatility jumps are proposed as important additional empirical features.
• Jumps may help explain return and volatility distributions and affect option valuation.
• The document offers a brief suggestion rather than a survey establishing consensus.

Tags

# Have any new stylized facts of asset returns been discovered since 2001?


# Have any new stylized facts of asset returns been discovered since 2001?












In 2001 R.Cont stated in "Empirical properties of asset returns: stylized facts and statistical issues" article a set of stylized statistical facts which are common to a wide set of financial assets. The set was later reproduced with minor changes in "Encyclopedia of Quantitative Finance" in 2010.

Here is the set:

- Absence of autocorrelations

- Heavy tails

- Gain/Loss assymetry

- Aggregational Gaussianity (later renamed to "Aggregational normality")

- Intermittency (later excluded from the set)

- Volatility clustering

- Conditional heavy tails

- Slow decay of autocorrelation in absolute returns

- Leverage effect

- Volume/volatility correlation

- Assymetry in time scales

Have any new candidates into the stylized facts set been discovered since then?

## Answer by Igor Pozdeev (score 4)

https://quant.stackexchange.com/a/39114

I think there has been established a strong argument for jumps (both in prices and volatility!). Jumps seem to matter a lot for explaining the distribution of volatility and price increments, as well as for option pricing. See Broadie, Chernov and Johannes (2007) link for further reference.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.