Bootstrap Methods for the Realized Bipower Variation and for Jump Testing

43 Pages Posted: 16 Jan 2013 Last revised: 1 Aug 2014

See all articles by Ana-Maria H. Dumitru

Ana-Maria H. Dumitru

University of Surrey, School of Economics

Date Written: April 1, 2014

Abstract

This paper proposes bootstrap methods for the realized bipower variation and the Barndorff-Nielsen and Shephard (2006a) test for jumps. These results enable inference for the realized bipower variation in the presence of jumps in prices. Both the i.i.d and the WILD bootstrap are shown to outperform results obtained through the asymptotic theory. To detect jumps in the presence of microstructure noise, we propose a procedure that averages test results across multiple sampling frequencies. This method considerably improves jump detection, by generating a higher level of power than the asymptotic test, unaccompanied by a simultaneous increase in size.

Keywords: jumps, nonparametric tests, bootstrap, realized bipower variation, median realized variation

JEL Classification: C15, C22, C14

Suggested Citation

Dumitru, Ana-Maria H., Bootstrap Methods for the Realized Bipower Variation and for Jump Testing (April 1, 2014). Available at SSRN: https://ssrn.com/abstract=2201083 or http://dx.doi.org/10.2139/ssrn.2201083

Ana-Maria H. Dumitru (Contact Author)

University of Surrey, School of Economics ( email )

Guildford
Surrey GU2 7XH
United Kingdom

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