Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation

Posted: 29 Feb 2008

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

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Abstract

In this article we provide an asymptotic distribution theory for some nonparametric 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 behavior. 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, realized variance, semimartingales, stochastic volatility

Suggested Citation

Barndorff-Nielsen, Ole E. and Shephard, Neil, Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation. Journal of Financial Econometrics, Vol. 4, No. 1, pp. 1-30, 2006. Available at SSRN: https://ssrn.com/abstract=922904

Ole E. Barndorff-Nielsen (Contact Author)

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

Ny Munkegade
Aarhus, DK 8000
Denmark

Neil Shephard

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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