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Activity signature functions for high-frequency data analysis

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  • Todorov, Viktor
  • Tauchen, George

Abstract

We define a new concept termed activity signature function, which is constructed from discrete observations of a continuous-time process, and derive its asymptotic properties as the sampling frequency increases. We show that the function is a useful device for estimating the activity level of the underlying process and in particular for deciding whether the process contains a continuous martingale. An application to $ /DM exchange rate over 1986-1999 indicates that a jump-diffusion model is more plausible than a pure-jump model. A second application to internet traffic at NASA servers shows that an infinite variation pure-jump model is appropriate for its modeling.

Suggested Citation

  • Todorov, Viktor & Tauchen, George, 2010. "Activity signature functions for high-frequency data analysis," Journal of Econometrics, Elsevier, vol. 154(2), pages 125-138, February.
    • Handle: RePEc:eee:econom:v:154:y:2010:i:2:p:125-138
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