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Econometrics of testing for jumps in financial economics using bipower variation 

Ole E. Barndorff-Nielsen: The Centre for Mathematical Physics and Stochastics (MaPhySto), University of Aarhus, Ny Munkegade, DK-8000 Aarhus C, Denmark oebn@imf.au.dk

Neil Shephard: Nuffield College, University of Oxford, Oxford OX1 1NF, UK neil.shephard@nuf.ox.ac.uk



In this paper we provide an asymptotic distribution theory for some non-parametric 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 behaviour. 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.

Keywords: Bipower variation; Jump process; Quadratic variation; Realised variance; Semimartingales;

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