Continuous‐time models, realized volatilities, and testable distributional implications for daily stock returns

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe provide an empirical framework for assessing the distributional properties of daily speculative returns within the context of the continuous-time jump di usion models traditionally used in asset pricing nance. Our approach builds directly on recently developed realized variation measures and non-parametric jump detection statistics constructed from high-frequency intraday data. A sequence of simple-to-implement moment-based tests involving various transformations of the daily returns speak directly to the importance of di erent distributional features, and may serve as useful diagnostic tools in the speci cation of empirically more realistic continuous-time asset pricing models. On applying the tests to the thirty individual stocks in the Dow Jones Industrial Average index, we nd that it is important to allow for both time-varying di usive volatility, jumps, and leverage e ects to satisfactorily describe the daily stock price dynamics.JEL Classi cations: C1, G1.

Cojumping: Evidence from the US Treasury bond and futures markets

“…Two data generating processes for the log price process, x t are implemented. The first is a constant volatility jump diffusion model originally designed by Jacod and Todorov (2009), and the second a stochastic volatility jump diffusion model, as in Andersen et al (2010), Chernov et al (2003), and Andersen et al (2002). The constant volatility process, CVP, is defined as:…”

Intraday jumps and US macroeconomic news announcements

“…A robust analysis of intraday jump tests in this context is left to future work. 5 An alternative sequential intraday jump detection approach introduced by Andersen et al (2008) has also been applied. The tests report quantitatively and qualitatively similar results, however only the results for the intraday measure of Eq.…”

“…Whilst showing evidence for the presence of jumps, these studies preclude the measurement of multiple jumps on particular days and prevent the exact intraday timing of jumps. These issues are addressed in Andersen et al (2007cAndersen et al ( , 2008 who present alternative methods for identifying intraday jumps, thereby providing superior information on jumps.…”

Intraday jumps in China's Treasury bond market and macro news announcements

“…A price jump differs from jump variation. Jump variation is only able to isolate the trading days that contain at least one jump, it does not, however, identify the individual jumps themselves (Andersen, Bollerslev, Frederiksen, & Nielsen, 2010;Evans, 2011). With high frequency asset returns, which react very quickly and sometimes dramatically to macroeconomic news announcements, it is interesting and useful to identify multiple intraday price jump sizes along with their precise timing.…”