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Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation

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  • Ole E. Barndorff-Nielsen
  • Neil Shephard

Abstract

In this article we provide an asymptotic distribution theory for some nonparametric tests of the hypothesis that asset prices have continuous sample paths. We study the behaviour of the tests using simulated data and see that certain versions of the tests have good finite sample behavior. We also apply the tests to exchange rate data and show that the null of a continuous sample path is frequently rejected. Most of the jumps the statistics identify are associated with governmental macroeconomic announcements. Copyright 2006, Oxford University Press.

Suggested Citation

  • Ole E. Barndorff-Nielsen & Neil Shephard, 2006. "Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 4(1), pages 1-30.
  • Handle: RePEc:oup:jfinec:v:4:y:2006:i:1:p:1-30
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbi022
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    1. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Econometric Analysis of Realised Covariation: High Frequency Covariance, Regression and Correlation in Financial Economics," Economics Papers 2002-W13, Economics Group, Nuffield College, University of Oxford, revised 18 Mar 2002.
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    11. Ole E. Barndorff-Nielsen & Svend Erik Graversen & Neil Shephard, 2003. "Power variation & stochastic volatility: a review and some new results," Economics Papers 2003-W19, Economics Group, Nuffield College, University of Oxford.
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    24. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
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