IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Identification of Price Jumps

  • Jan Hanousek
  • Evzen Kocenda
  • Jan Novotny

We performed an extensive simulation study to compare the relative performance of many price-jump indicators with respect to false positive and false negative probabilities. We simulated twenty different time series specifications with different intraday noise volatility patterns and price-jump specifications. The double McNemar (1947) non-parametric test has been applied on constructed artificial time series to compare fourteen different price-jump indicators that are widely used in the literature. The results suggest large differences in terms of performance among the indicators, but we were able to identify the best-performing indicators. In the case of false positive probability, the best-performing price-jump indicator is based on thresholding with respect to centiles. In the case of false negative probability, the best indicator is based on bipower variation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cerge-ei.cz/pdf/wp/Wp434.pdf
Download Restriction: no

Paper provided by The Center for Economic Research and Graduate Education - Economics Institute, Prague in its series CERGE-EI Working Papers with number wp434.

as
in new window

Length:
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:cer:papers:wp434
Contact details of provider: Postal:
P.O. Box 882, Politickych veznu 7, 111 21 Praha 1

Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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.
  2. Ole Barndorff-Nielsen & Svend Erik Graversen & Jean Jacod & Mark Podolskij & Neil Shephard, 2004. "A Central Limit Theorem for Realised Power and Bipower Variations of Continuous Semimartingales," Economics Papers 2004-W29, Economics Group, Nuffield College, University of Oxford.
  3. LAHAYE, Jérôme & LAURENT, Sébastien & NEELY, Christopher J., . "Jumps, cojumps and macro announcements," CORE Discussion Papers RP 2413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Kubilius Kestutis & Platen Eckhard, 2002. "Rate of Weak Convergence of the Euler Approximation for Diffusion Processes with Jumps," Monte Carlo Methods and Applications, De Gruyter, vol. 8(1), pages 83-96, December.
  5. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2007. "Roughing It Up: Including Jump Components in the Measurement, Modeling, and Forecasting of Return Volatility," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 701-720, November.
  6. Torben G. Andersen & Luca Benzoni & Jesper Lund, 2002. "An Empirical Investigation of Continuous-Time Equity Return Models," Journal of Finance, American Finance Association, vol. 57(3), pages 1239-1284, 06.
  7. Michael Johannes, 2004. "The Statistical and Economic Role of Jumps in Continuous-Time Interest Rate Models," Journal of Finance, American Finance Association, vol. 59(1), pages 227-260, 02.
  8. Jun Liu & Francis A. Longstaff & Jun Pan, 2003. "Dynamic Asset Allocation with Event Risk," Journal of Finance, American Finance Association, vol. 58(1), pages 231-259, 02.
  9. Bouchaud, Jean-Philippe, 2002. "An introduction to statistical finance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 313(1), pages 238-251.
  10. Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," Economics Papers 2006-W03, Economics Group, Nuffield College, University of Oxford.
  11. Bollerslev, Tim & Law, Tzuo Hann & Tauchen, George, 2008. "Risk, jumps, and diversification," Journal of Econometrics, Elsevier, vol. 144(1), pages 234-256, May.
  12. Jiang, George J. & Oomen, Roel C.A., 2008. "Testing for jumps when asset prices are observed with noise-a "swap variance" approach," Journal of Econometrics, Elsevier, vol. 144(2), pages 352-370, June.
  13. 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.
  14. Ait-Sahalia, Yacine, 2004. "Disentangling diffusion from jumps," Journal of Financial Economics, Elsevier, vol. 74(3), pages 487-528, December.
  15. Darrell Duffie & Jun Pan & Kenneth Singleton, 1999. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," NBER Working Papers 7105, National Bureau of Economic Research, Inc.
  16. Jean-Philippe Bouchaud & Julien Kockelkoren & Marc Potters, 2004. "Random walks, liquidity molasses and critical response in financial markets," Science & Finance (CFM) working paper archive 500063, Science & Finance, Capital Fund Management.
  17. Peter Nyberg & Anders Wilhelmsson, 2009. "Measuring Event Risk," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 7(3), pages 265-287, Summer.
  18. Jean-Philippe Bouchaud, 2002. "An introduction to statistical finance," Science & Finance (CFM) working paper archive 313238, Science & Finance, Capital Fund Management.
  19. Pan, Jun, 2002. "The jump-risk premia implicit in options: evidence from an integrated time-series study," Journal of Financial Economics, Elsevier, vol. 63(1), pages 3-50, January.
  20. 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.
  21. Jan Novotny, 2010. "Were Stocks during the Financial Crisis More Jumpy: A Comparative Study," CERGE-EI Working Papers wp416, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  22. Ole E. Barndorff-Nielsen & Neil Shephard, 2003. "Econometrics of testing for jumps in financial economics using bipower variation," Economics Papers 2003-W21, Economics Group, Nuffield College, University of Oxford.
  23. Jan Hanousek & Evzen Kocenda & Ali M. Kutan, 2008. "The Reaction of Asset Prices to Macroeconomic Announcements in New EU Markets: Evidence from Intraday Data," CERGE-EI Working Papers wp349, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  24. Eryiğit, Mehmet & Çukur, Sadik & Eryiğit, Resul, 2009. "Tail distribution of index fluctuations in World markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(9), pages 1879-1886.
  25. Jarrow, Robert A & Rosenfeld, Eric R, 1984. "Jump Risks and the Intertemporal Capital Asset Pricing Model," The Journal of Business, University of Chicago Press, vol. 57(3), pages 337-51, July.
  26. George J. Jiang & Roel C. A. Oomen, 2007. "Estimating Latent Variables and Jump Diffusion Models Using High-Frequency Data," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 5(1), pages 1-30.
  27. Jan Hanousek & Evžen Kočenda, 2011. "Foreign News and Spillovers in Emerging European Stock Markets," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 170-188, 02.
  28. Quinn McNemar, 1947. "Note on the sampling error of the difference between correlated proportions or percentages," Psychometrika, Springer;The Psychometric Society, vol. 12(2), pages 153-157, June.
  29. Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. " An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-39, July.
  30. Armand Joulin & Augustin Lefevre & Daniel Grunberg & Jean-Philippe Bouchaud, 2008. "Stock price jumps: news and volume play a minor role," Papers 0803.1769, arXiv.org.
  31. Hanousek Jan & Kočenda Evžen & Novotný Jan, 2012. "The identification of price jumps," Monte Carlo Methods and Applications, De Gruyter, vol. 18(1), pages 53-77, January.
  32. Mark Broadie & Ashish Jain, 2008. "The Effect Of Jumps And Discrete Sampling On Volatility And Variance Swaps," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(08), pages 761-797.
  33. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
  34. Parameswaran Gopikrishnan & Vasiliki Plerou & Luis A. Nunes Amaral & Martin Meyer & H. Eugene Stanley, 1999. "Scaling of the distribution of fluctuations of financial market indices," Papers cond-mat/9905305, arXiv.org.
  35. Peter Carr & Liuren Wu, 2010. "Stock Options and Credit Default Swaps: A Joint Framework for Valuation and Estimation," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 8(4), pages 409-449, Fall.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp434. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.