A Comprehensive Comparison of Alternative Tests for Jumps in Asset Prices

Marina Theodosiou () and Filip Zikes ()
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Marina Theodosiou: Central Bank of Cyprus
Filip Zikes: Imperial College London

No 2011-2, Working Papers from Central Bank of Cyprus

Abstract: This paper presents a comprehensive comparison of the existing tests for the presence of jumps in prices of financial assets. The relative performance of the tests is examined in a Monte Carlo simulation, covering scenarios of both finite and infinite activity jumps, stochastic volatility models with continuous and discontinuous volatility sample paths, microstructure noise, infrequent trading and deterministic diurnal volatility. The simulation results reveal important differences in terms of size and power across the different data generating processes and sensitivity to the presence of zero returns and microstructure frictions in the data. An empirical application to assets from different classes complements the analysis.

Keywords: Quadratic variation; jumps; stochastic volatility; realized measures; high-frequency data (search for similar items in EconPapers)
JEL-codes: C12 C14 E31 G10 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2011-07
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Persistent link: https://EconPapers.repec.org/RePEc:cyb:wpaper:2011-2

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