We propose a technique to avoid spurious detections of jumps in highfrequency data via an explicit thresholding on available test statistics
AbstractWe prove that it eliminates asymptotically all spurious detections. Monte Carlo results show that it performs also well in nite samples. In Dow Jones stocks, spurious detections represent up to 50% of the jumps detected initially between 2006 and 2008. For the majority of stocks, jumps do not cluster in time and no cojump a ects all stocks simultaneously, suggesting jump risk is diversi able. We relate the remaining jumps to macroeconomic news, prescheduled company-speci c announcements, and stories from news agencies which include a variety of unscheduled and uncategarized events. The majority of news do not cause jumps. One exception are share buybacks announcements. Fed rate news have an important impact but rarely cause jumps. Another nding is that 60% of jumps occur without any news event. For one third of the jumps with no news we observe an unusual behavior in the volume of transactions. Hence, liquidity pressures are probably another important factor of jumps.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 11-36.
Length: 69 pages
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jumps; high-frequency data; spurious detections; jumps dynamics; news releases; cojumps;
Find related papers by JEL classification:
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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- NEP-ALL-2013-07-28 (All new papers)
- NEP-ECM-2013-07-28 (Econometrics)
- NEP-ETS-2013-07-28 (Econometric Time Series)
- NEP-MST-2013-07-28 (Market Microstructure)
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