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Identifying Jumps in Financial Assets: a Comparison between Nonparametric Jump Tests

Dumitru, A and Urga, G (2012) Identifying Jumps in Financial Assets: a Comparison between Nonparametric Jump Tests Journal of Business & Economic Statistics, 30 (2). 242 - 255. ISSN 0735-0015

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Abstract

We perform a comprehensive Monte Carlo comparison between nine alternative procedures available in the literature to detect jumps in financial assets using high-frequency data. We evaluate size and power properties of the procedures under alternative sampling frequencies, persistence in volatility, jump size and intensity, and degree of contamination with microstructure noise. The overall best performance is shown by the Andersen, Bollerslev, and Dobrev (2007 ) and Lee and Mykland (2008 ) intraday procedures (ABD-LM), provided the price process is not very volatile. We propose two extensions to the existing battery of tests. The first regards the finite sample improvements based on simulated critical values for the ABD-LM procedure. The second regards a procedure that combines frequencies and tests able to reduce the number of spurious jumps. Finally, we report an empirical analysis using real high frequency data on five stocks listed in the New York Stock Exchange.

Item Type: Article
Additional Information: This is an electronic version of an article published in Journal of Business & Economic Statistics, 30(2), 242-255 (2012). Journal of Business & Economic Statistics is available online at: http://www.tandfonline.com/loi/ubes20
Divisions: Faculty of Business, Economics and Law > Economics
Depositing User: Symplectic Elements
Date Deposited: 22 Aug 2012 14:45
Last Modified: 09 Jun 2014 13:18
URI: http://epubs.surrey.ac.uk/id/eprint/427926

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