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The Identification of Price Jumps

Jan Hanousek, Evžen Kočenda and Jan Novotny ()

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We performed an extensive simulation study to compare the relative performance of many price-jump indicators with respect to false positive and false negative probabilities. We simulated twenty different time series specifications with different intraday noise volatility patterns and price-jump specifications. The double McNemar (1947) non-parametric test has been applied on constructed artificial time series to compare fourteen different price-jump indicators that are widely used in the literature. The results suggest large differences in terms of performance among the indicators, but we were able to identify the best-performing indicators. In the case of false positive probability, the best-performing price-jump indicator is based on thresholding with respect to centiles. In the case of false negative probability, the best indicator is based on bipower variation.

Keywords: price jumps; price-jump indicators; non-parametric testing; Monte Carlo simulations; financial econometrics (search for similar items in EconPapers)
JEL-codes: C14 C58 F37 G15 G17 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-ecm and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: The identification of price jumps (2012) Downloads
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