Common price and volatility jumps in noisy high-frequency data

Markus Bibinger and Lars Winkelmann

No 2014-037, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We introduce a statistical test for simultaneous jumps in the price of a financial asset and its volatility process. The proposed test is based on high-frequency tick-data and is robust to market microstructure frictions. To localize volatility jumps, we design and analyze a nonparametric spectral estimator of the spot volatility process. A simulation study and an empirical example with NASDAQ order book data demonstrate the practicability of the proposed methods and highlight the important role played by price volatility co-jumps.

Keywords: high-frequency data; microstructure noise; nonparametric volatility estimation; volatility jumps (search for similar items in EconPapers)
JEL-codes: C14 E58 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2014-037

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