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Common price and volatility jumps in noisy high-frequency data

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  • Bibinger, Markus
  • Winkelmann, Lars

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.

Suggested Citation

  • Bibinger, Markus & Winkelmann, Lars, 2014. "Common price and volatility jumps in noisy high-frequency data," SFB 649 Discussion Papers 2014-037, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2014-037
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    References listed on IDEAS

    as
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    13. Bibinger, Markus & Winkelmann, Lars, 2013. "Econometrics of co-jumps in high-frequency data with noise," SFB 649 Discussion Papers 2013-021, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    14. Giuseppe Curci & Fulvio Corsi, 2012. "Discrete sine transform for multi-scale realized volatility measures§," Quantitative Finance, Taylor & Francis Journals, vol. 12(2), pages 263-279, April.
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    18. Jean Jacod & Viktor Todorov, 2010. "Do price and volatility jump together?," Papers 1010.4990, arXiv.org.
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    20. Bibinger, Markus & Hautsch, Nikolaus & Malec, Peter & Reiss, Markus, 2013. "Estimating the quadratic covariation matrix from noisy observations: Local method of moments and efficiency," SFB 649 Discussion Papers 2013-017, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
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    More about this item

    Keywords

    high-frequency data; microstructure noise; nonparametric volatility estimation; volatility jumps;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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