Calendar Time Sampling of High Frequency Financial Asset Price and the Verdict on Jumps
In the current paper, we investigate the bias introduced through the calendar time sampling of the price process of financial assets. We analyze results from a Monte Carlo simulation which point to the conclusion that the multitude of jumps reported in the literature might be, to a large extent, an artifact of the bias introduced through the previous tick sampling scheme, used for the time homogenization the price series. We advocate the use of Akima cubic splines as an alternative to the popular previous tick method. Monte Carlo simulation results confirm the suitability of Akima cubic splines in high frequency applications and the advantages of these over other calendar time sampling schemes, such as the linear interpolation and the previous tick method. Empirical results from the FX market complement the analysis.
|Date of creation:||Sep 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=1|
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.:
- George CHACKO & Luis M. VICEIRA, 1999.
"Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets,"
FAME Research Paper Series
rp11, International Center for Financial Asset Management and Engineering.
- George Chacko & Luis M. Viceira, 2005. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1369-1402.
- Chacko, George & Viceira, Luis M, 2005. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," CEPR Discussion Papers 4913, C.E.P.R. Discussion Papers.
- George Chacko & Luis M. Viceira, 1999. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," NBER Working Papers 7377, National Bureau of Economic Research, Inc.
- Lee, Sang-Hyop & Mason, Andrew, 2007.
"Who gains from the demographic dividend? Forecasting income by age,"
International Journal of Forecasting,
Elsevier, vol. 23(4), pages 603-619.
- Sang Hyop Lee & Andrew Mason, 2006. "Who Gains from the Demographic Dividend? Forecasting Income by Age," Working Papers 200613, University of Hawaii at Manoa, Department of Economics.
- Fulvio Corsi & Gilles Zumbach & Ulrich A. Muller & Michel M. Dacorogna, 2001.
"Consistent High-precision Volatility from High-frequency Data,"
Banca Monte dei Paschi di Siena SpA, vol. 30(2), pages 183-204, 07.
- Fulvio Corsi & Gilles Zumbach & Ulrich Müller & Michel Dacorogna, 2004. "Consistent high-precision volatility from high-frequency data," Finance 0407005, EconWPA.
- Nour Meddahi, 2002.
"A theoretical comparison between integrated and realized volatility,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 17(5), pages 479-508.
- Meddahi, N., 2001. "A Theoretical Comparison Between Integrated and Realized Volatilies," Cahiers de recherche 2001-26, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- MEDDAHI, Nour, 2001. "A Theoretical Comparison Between Integrated and Realized Volatilies," Cahiers de recherche 2001-26, Universite de Montreal, Departement de sciences economiques.
- Mark Podolskij & Daniel Ziggel, 2008. "New tests for jumps: a threshold-based approach," CREATES Research Papers 2008-34, School of Economics and Management, University of Aarhus.
- Tim Bollerslev & Hao Zhou, 2001.
"Estimating stochastic volatility diffusion using conditional moments of integrated volatility,"
Finance and Economics Discussion Series
2001-49, Board of Governors of the Federal Reserve System (U.S.).
- Bollerslev, Tim & Zhou, Hao, 2002. "Estimating stochastic volatility diffusion using conditional moments of integrated volatility," Journal of Econometrics, Elsevier, vol. 109(1), pages 33-65, July.
- Alain Chaboud & Benjamin Chiquoine & Erik Hjalmarsson & Mico Loretan, 2007.
"Frequency of observation and the estimation of integrated volatility in deep and liquid financial markets,"
International Finance Discussion Papers
905, Board of Governors of the Federal Reserve System (U.S.).
- Chaboud, Alain P. & Chiquoine, Benjamin & Hjalmarsson, Erik & Loretan, Mico, 2010. "Frequency of observation and the estimation of integrated volatility in deep and liquid financial markets," Journal of Empirical Finance, Elsevier, vol. 17(2), pages 212-240, March.
- Alain Chaboud & Benjamin Chiquoine & Erik Hjalmarsson & Mico Loretan, 2008. "Frequency of observation and the estimation of integrated volatility in deep and liquid financial markets," BIS Working Papers 249, Bank for International Settlements.
- Torben G. Andersen & Tim Bollerslev & Nour Meddahi, 2004.
"Analytical Evaluation Of Volatility Forecasts,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1079-1110, November.
- Chernov, Mikhail & Gallant, A. Ronald & Ghysels, Eric & Tauchen, George, 2002.
"Alternative Models for Stock Price Dynamic,"
02-03, Duke University, Department of Economics.
- Andersen, Torben G. & Bollerslev, Tim & Christoffersen, Peter F. & Diebold, Francis X., 2006. "Volatility and Correlation Forecasting," Handbook of Economic Forecasting, Elsevier.
When requesting a correction, please mention this item's handle: RePEc:cyb:wpaper:2010-7. 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: (Maria Nicolaidou)
If references are entirely missing, you can add them using this form.