Nonparametric tests for pathwise properties of semimartingales
We propose two nonparametric tests for investigating the pathwise properties of a signal modeled as the sum of a L\'evy process and a Brownian semimartingale. Using a nonparametric threshold estimator for the continuous component of the quadratic variation, we design a test for the presence of a continuous martingale component in the process and a test for establishing whether the jumps have finite or infinite variation, based on observations on a discrete time grid. We evaluate the performance of our tests using simulations of various stochastic models and use the tests to investigate the fine structure of the DM/USD exchange rate fluctuations and SPX futures prices. In both cases, our tests reveal the presence of a non-zero Brownian component and a finite variation jump component.
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- Neil Shephard & Ole Barndorff-Nielsen, 2003.
"Econometrics of testing for jumps in financial economics using bipower variation,"
Economics Series Working Papers
2004-FE-01, University of Oxford, Department of Economics.
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