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Jumps in the Volatility of Financial Markets

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  • PERRON, Benoît

Abstract

Recent work suggests that the conditional variance of financial returns may exhibit sudden jumps. This paper extends a non-parametric procedure to detect discontinuities in otherwise continuous functions of a random variable developed by Delgado and Hidalgo (1996) to higher conditional moments, in particular the conditional variance. Simulation results show that the procedure provides reasonable estimates of the number and location of jumps. This procedure detects several jumps in the conditional variance of daily returns on the S&P 500 index.

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File URL: http://hdl.handle.net/1866/476
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Bibliographic Info

Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9912.

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Length: 31 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:mtl:montde:9912

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Keywords: jum; conditional variance; kernel; one-sided windows;

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References

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Citations

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Cited by:
  1. Chen, Gongmeng & Choi, Yoon K. & Zhou, Yong, 2005. "Nonparametric estimation of structural change points in volatility models for time series," Journal of Econometrics, Elsevier, vol. 126(1), pages 79-114, May.
  2. Bandi, Federico M. & Nguyen, Thong H., 2003. "On the functional estimation of jump-diffusion models," Journal of Econometrics, Elsevier, vol. 116(1-2), pages 293-328.
  3. Shinn-Juh Lin & Jian Yang, 2000. "Testing Shifts in Financial Models with Conditional Heteroskedasticity: An Empirical Distribution Function Approach," Econometric Society World Congress 2000 Contributed Papers 0063, Econometric Society.

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