Dynamic asset price jumps and the performance of high frequency tests and measures

This paper provides an extensive evaluation of high frequency jump tests and measures, in the context of dynamic models for asset price jumps. Specifically, we investigate: i) the power of alternative tests to detect individual price jumps, including in the presence of volatility jumps; ii) the frequency with which sequences of dynamic jumps are identified; iii) the accuracy with which the magnitude and sign of sequential jumps are estimated; and iv) the robustness of inference about dynamic jumps to test and measure design. Substantial differences are discerned in the performance of alternative methods in certain dimensions, with inference being sensitive to these differences in some cases. Accounting for measurement error when using measures constructed from high frequency data to conduct inference on dynamic jump models would appear to be advisable.