Testing for jumps in a discretely observed process
Abstract
We propose a new test to determine whether jumps are present in asset returns or other discretely sampled processes. As the sampling interval tends to 0, our test statistic converges to 1 if there are jumps, and to another deterministic and known value (such as 2) if there are no jumps. The test is valid for all It\^{o} semimartingales, depends neither on the law of the process nor on the coefficients of the equation which it solves, does not require a preliminary estimation of these coefficients, and when there are jumps the test is applicable whether jumps have finite or infinite-activity and for an arbitrary Blumenthal--Getoor index. We finally implement the test on simulations and asset returns data.
Keywords
Cite
@article{arxiv.0903.0226,
title = {Testing for jumps in a discretely observed process},
author = {Yacine Aït-Sahalia and Jean Jacod},
journal= {arXiv preprint arXiv:0903.0226},
year = {2009}
}
Comments
Published in at http://dx.doi.org/10.1214/07-AOS568 the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org)