Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation

Nuffield College Economics Working Paper No. 2003-W21

Posted: 4 Nov 2003

See all articles by Ole E. Barndorff-Nielsen

Ole E. Barndorff-Nielsen

University of Aarhus - Thiele Centre, Department of Mathematical Sciences

Neil Shephard

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: October 17, 2003

Abstract

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 volatility

Suggested Citation

Barndorff-Nielsen, Ole E. and Shephard, Neil, Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation (October 17, 2003). Nuffield College Economics Working Paper No. 2003-W21. Available at SSRN: https://ssrn.com/abstract=459802

Ole E. Barndorff-Nielsen

University of Aarhus - Thiele Centre, Department of Mathematical Sciences ( email )

Ny Munkegade
Aarhus, DK 8000
Denmark

Neil Shephard (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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