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Identi�cation of jumps in �financial price series

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  • Hellström, Jörgen
  • Lönnbark, Carl

Abstract

The paper outlines and tests, by means of Monte-Carlo simulations, a simple strategy of using existing non-parametric tests for jumps at the daily frequency to identify jumps at higher sampling frequencies. The suggested strategy allow for identi�cation of the number of jumps and jump times during a day, as well as, the size and direction (negative or positive) of the jumps. The method is of importance in order to facilitate detailed empirical studies concerning, for example, causes for jumps in fi�nancial price series at �ner levels than the daily. The Monte Carlo study reveals that the strategy works reasonably well, particular for lower jump intensities. An application of the studied strategy on the Handelsbanken stock is provided.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30977.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:30977

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Keywords: Financial econometrics; jumps; realized variance; bipower variation; stock price;

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  1. Bollerslev, Tim & Law, Tzuo Hann & Tauchen, George, 2008. "Risk, jumps, and diversification," Journal of Econometrics, Elsevier, vol. 144(1), pages 234-256, May.
  2. Suzanne S. Lee & Per A. Mykland, 2008. "Jumps in Financial Markets: A New Nonparametric Test and Jump Dynamics," Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2535-2563, November.
  3. Neil Shephard & Ole E. Barndorff-Nielsen, 2003. "Power and bipower variation with stochastic volatility and jumps," Economics Series Working Papers 2003-W18, University of Oxford, Department of Economics.
  4. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2002. "Parametric and Nonparametric Volatility Measurement," Center for Financial Institutions Working Papers 02-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
  5. Xin Huang & George Tauchen, 2005. "The Relative Contribution of Jumps to Total Price Variance," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 3(4), pages 456-499.
  6. Ole E. Barndorff-Nielsen, 2004. "Power and Bipower Variation with Stochastic Volatility and Jumps," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 2(1), pages 1-37.
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