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On the jump activity index for semimartingales

Empirical evidence of asset price discontinuities or “jumps” in financial markets has been well documented in the literature. Recently, Aït-Sahalia and Jacod (2009b) defined a general “jump activity index” to describe the degree of jump activities for asset price semimartingales, and provided a cons...

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Bibliographic Details
Published in:Journal of econometrics 2012-02, Vol.166 (2), p.213-223
Main Authors: Jing, Bing-Yi, Kong, Xin-Bing, Liu, Zhi, Mykland, Per
Format: Article
Language:English
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Summary:Empirical evidence of asset price discontinuities or “jumps” in financial markets has been well documented in the literature. Recently, Aït-Sahalia and Jacod (2009b) defined a general “jump activity index” to describe the degree of jump activities for asset price semimartingales, and provided a consistent estimator when the underlying process contains both a continuous and a jump component. However, only large increments were used in their estimator so that the effective sample size is very small even for large sample sizes. In this paper, we explore ways to improve the Aït-Sahalia and Jacod estimator by making use of all increments, large and small. The improvement is verified through simulations. A real example is also given.
ISSN:0304-4076
1872-6895
DOI:10.1016/j.jeconom.2011.09.036