In this paper we propose a test to determine whether jumps are present in a discretely sampled process or not. We use the concept of truncated power variation to construct our test statistics for (i) semimartingale models and (ii) semimartingale models with noise. The test statistics converge to in nity if jumps are present and have a normal distribution otherwise. Our method is valid (under very weak assumptions) for all semimartingales with absolute continuous characteristics and rather general model for the noise process. We nally implement the test and present the simulation results. Our simulations suggest that for semimartingale models the new test is much more powerful then tests proposed by Barndorff-Nielsen and Shephard (2006) and At-Sahalia and Jacod (2008).
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Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number
2008-34.
Find related papers by JEL classification: C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
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