The identification of price jumps

0377193 - NHU-C 2013 RIV DE eng J - Journal Article
Hanousek, Jan - Kočenda, Evžen - Novotný, Jan
The identification of price jumps.
Monte Carlo Methods and Applications. Roč. 18, č. 1 (2012), s. 53-77. ISSN 0929-9629
R&D Projects: GA ČR(CZ) GAP403/11/0020; GA ČR(CZ) GBP402/12/G097
Institutional support: PRVOUK-P23
Keywords : price jumps * non-parametric testing * financial econometrics
Subject RIV: AH - Economics

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 nonparametric test (Psychometrika 12 (1947), 153–157) 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.
Permanent Link: http://hdl.handle.net/11104/0209422