Testing for Jumps in the Presence of Market Microstructure Noise

Piotr Pluciennik

Abstract


Discontinuous price changes called jumps are an essential component of financial asset price dynamics. As it was shown by Andersen, Bollerslev [1], Andersen et al. [2] and Lahaye et al. [3], jump occurrence in prices of various financial instruments is strongly correlated with macroeconomic announcements. Simulation researches show that the tests for jumps generally are sufficiently powerful, provided that high frequency data was used. Unfortunately, high frequency data is usually polluted by market microstructure noise (nonsynchronous trading, bid-ask bounce, discreteness etc.). In this paper we present results of test for jumps in the levels of three European stock indexes. We use two alternative approaches to testing of jump occurence by the assuption of presence of market microstructure noise: by Barndorff-Nielsen and Shephard [4] with, introduced by Andersen et al. [2], staggered bi- and tripower variation as estimators of integrated volatility and quarticity, and analytically modified form of swap variance tests introduced by Jiang and Oomen [5].

Full Text: PDF

Refbacks

  • There are currently no refbacks.


The Thai Journal of Mathematics organized and supported by The Mathematical Association of Thailand and Thailand Research Council and the Center for Promotion of Mathematical Research of Thailand (CEPMART).

Copyright 2020 by the Mathematical Association of Thailand.

All rights reserve. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission of the Mathematical Association of Thailand.

|ISSN 1686-0209|