Rate-optimal tests for jumps in diffusion processes

Taesuk Lee, Mico Loretan and Werner Ploberger

Statistical Papers, 2013, vol. 54, issue 4, 1009-1041

Abstract: Suppose one has a sample of high-frequency intraday discrete observations of a continuous time random process, such as foreign exchange rates and stock prices, and wants to test for the presence of jumps in the process. We show that the power of any test of this hypothesis depends on the frequency of observation. In particular, if the process is observed at intervals of length $$1/n$$ 1 / n and the instantaneous volatility of the process is given by $$ \sigma _{t}$$ σ t , we show that at best one can detect jumps of height no smaller than $$\sigma _{t}\sqrt{2\log (n)/n}$$ σ t 2 log ( n ) / n . We present a new test which achieves this rate for diffusion-type processes, and examine its finite-sample properties using simulations. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Financial econometrics; High-frequency data; Jumps; Likelihood ratio test (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00362-013-0541-y (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:stpapr:v:54:y:2013:i:4:p:1009-1041

Ordering information: This journal article can be ordered from
http://www.springer. ... business/journal/362

DOI: 10.1007/s00362-013-0541-y

Access Statistics for this article

Statistical Papers is currently edited by C. Müller, W. Krämer and W.G. Müller

More articles in Statistical Papers from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().