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New tests for jumps: a threshold-based approach

Author

Listed:
  • Mark Podolskij
  • Daniel Ziggel

    (School of Economics and Management, University of Aarhus, Denmark and CREATES)

Abstract

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 infinity 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 finally 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 Aït-Sahalia and Jacod (2008).

Suggested Citation

  • Mark Podolskij & Daniel Ziggel, 2008. "New tests for jumps: a threshold-based approach," CREATES Research Papers 2008-34, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2008-34
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    File URL: https://repec.econ.au.dk/repec/creates/rp/08/rp08_34.pdf
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    References listed on IDEAS

    as
    1. Ole BARNDORFF-NIELSEN & Svend Erik GRAVERSEN & Jean JACOD & Mark PODOLSKIJ & Neil SHEPHARD, 2004. "A Central Limit Theorem for Realised Power and Bipower Variations of Continuous Semimartingales," OFRC Working Papers Series 2004fe21, Oxford Financial Research Centre.
    2. Asger Lunde & Peter Reinhard Hansen, 2004. "Realized Variance and IID Market Microstructure Noise," Econometric Society 2004 North American Summer Meetings 526, Econometric Society.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lena Cleanthous & Pany Karamanou, 2011. "The ECB Monetary Policy and the Current Financial Crisis," Working Papers 2011-1, Central Bank of Cyprus.
    2. Marina Theodosiou, 2010. "Calendar Time Sampling of High Frequency Financial Asset Price and the Verdict on Jumps," Working Papers 2010-7, Central Bank of Cyprus.
    3. Torben B. Rasmussen, 2009. "Jump Testing and the Speed of Market Adjustment," CREATES Research Papers 2009-08, Department of Economics and Business Economics, Aarhus University.

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    More about this item

    Keywords

    Central Limit Theorem; High-Frequency Data; Microstructure Noise; Semimartingale Theory; Tests for Jumps; Truncated Power Variation;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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