Econometrics of Testing for Jumps in Financial Economics using Bipower Variation
Ole E. Barndorff-Nielsen
University of Aarhus - Thiele Centre, Department of Mathematical Sciences
University of Oxford - Oxford-Man Institute; University of Oxford - Nuffield College; University of Oxford - Oxford Financial Research Centre
October 17, 2003
Nuffield College Economics Working Paper No. 2003-W21
In this paper we provide an asymptotic distribution theory for some non-parametric tests of the hypothesis that asset prices have continuous sample paths. We study the behaviour of the tests using simulated data and see that certain versions of the tests have good finite sample behaviour. We also apply the tests to exchange rate data and show that the null of a continuous sample path is frequently rejected. Most of the jumps the statistics identify are associated with governmental macroeconomic announcements.
Keywords: Bipower variation, Jump process, Quadratic variation, Realised variance, Semimartingales, Stochastic volatilityworking papers series
Date posted: November 4, 2003
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