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
Abstract
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;
Click
here to download paper
