Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86689
Authors: 
Bos, Charles S.
Janus, Pawel
Koopman, Siem Jan
Year of Publication: 
2009
Series/Report no.: 
Tinbergen Institute Discussion Paper 09-110/4
Abstract: 
This paper considers spot variance path estimation from datasets of intraday high frequency asset prices in the presence of diurnal variance patterns, jumps, leverage effects and microstructure noise. We rely on parametric and nonparametric methods. The estimated spot variance path can be used to extend an existing high frequency jump test statistic, to detect arrival times of jumps and to obtain distributional characteristics of detected jumps. The effectiveness of our approach is explored through Monte Carlo simulations. It is shown that sparse sampling for mitigating the impact of microstructure noise has an adverse effect on both spot variance estimation and jump detection. In our approach we can analyze high frequency price observations that are contaminated with microstructure noise without the need for sparse sampling, say at fifteen minute intervals. An empirical illustration is presented for the intraday EUR/USD exchange rates. Our main finding is that fewer jumps are detected when sampling intervals increase.
Subjects: 
high frequency
intraday periodicity
jump testing
leverage effect
microstructure noise
pre-averaged bipower variation
spot variance
JEL: 
C12
C13
C22
G10
G14
Document Type: 
Working Paper

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