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Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data

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  • Yacine A�t-Sahalia
  • Jean Jacod
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    Abstract

    This paper reports some of the recent developments in the econometric analysis of semimartingales estimated using high frequency financial returns. It describes a simple yet powerful methodology to decompose asset returns sampled at high frequency into their base components (continuous, small jumps, large jumps), determine the relative magnitude of the components, and analyze the finer characteristics of these components such as the degree of activity of the jumps. We incorporate to effect of market microstructure noise on the test statistics, apply the methodology to high frequency individual stock returns, transactions and quotes, stock index returns and compare the qualitative features of the estimated process for these different data and discuss the economic implications of the results.( JEL C58, G12, G13)

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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Literature.

    Volume (Year): 50 (2012)
    Issue (Month): 4 (December)
    Pages: 1007-50

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    Handle: RePEc:aea:jeclit:v:50:y:2012:i:4:p:1007-50

    Note: DOI: 10.1257/jel.50.4.1007
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    References

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    Cited by:
    1. Vortelinos, Dimitrios I., 2014. "Optimally sampled realized range-based volatility estimators," Research in International Business and Finance, Elsevier, Elsevier, vol. 30(C), pages 34-50.
    2. Alexeev, Vitali & Dungey, Mardi, 2013. "Equity portfolio diversification with high frequency data," Working Papers, University of Tasmania, School of Economics and Finance 2013-18, University of Tasmania, School of Economics and Finance, revised 01 Nov 2013.
    3. Diep Duong & Norman Swanson, 2013. "Empirical Evidence on the Importance of Aggregation, Asymmetry, and Jumps for Volatility Prediction," Departmental Working Papers, Rutgers University, Department of Economics 201321, Rutgers University, Department of Economics.
    4. Caporin, Massimiliano & Kolokolov, Aleksey & Renò, Roberto, 2014. "Multi-jumps," MPRA Paper 58175, University Library of Munich, Germany.
    5. Lars Winkelmann, 2013. "Quantitative forward guidance and the predictability of monetary policy - A wavelet based jump detection approach -," SFB 649 Discussion Papers SFB649DP2013-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Deniz Erdemlioglu & Sébastien Laurent & Christopher J. Neely, 2013. "Which continuous-time model is most appropriate for exchange rates?," Working Papers, Federal Reserve Bank of St. Louis 2013-024, Federal Reserve Bank of St. Louis.
    7. Aït-Sahalia, Yacine & Fan, Jianqing & Li, Yingying, 2013. "The leverage effect puzzle: Disentangling sources of bias at high frequency," Journal of Financial Economics, Elsevier, Elsevier, vol. 109(1), pages 224-249.
    8. Maciej Kostrzewski, 2014. "Bayesian DEJD model and detection of asymmetric jumps," Papers 1404.2050, arXiv.org.

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