Economics Seminar: Testing for co-jumps with high frequency financial data: an approach based on first-high-low-last prices

When?

Wednesday 11 May 2011, 16:00

Where?

04AD00

Open to:

Public, Staff, Students

Speaker:

Prof Heather Anderson (Monash University)

Prof Heather Anderson (Monash University)

"Testing for co-jumps with high frequency financial data: an approach based on first-high-low-last prices"

Abstract

This paper proposes a new approach to test for common intraday jumps in a panel of high frequency financial data. We utilize intraday first-high-low-last values of asset prices to construct a novel estimator for the cross-variance structure of a large panel of high frequency financial data, and then employ this estimator to provide a first-high-low-last price based test statistic to determine if this covariance is partly attributable to common large discrete price movements (co-jumps). We study the finite sample behavior of our first-high-low-last price based test using Monte Carlo simulation, and find that it is more powerful than the existing return-based co-jump test (see Bollersvlev et al (2008)) for covariance measured at the same sampling frequency. When applied to a panel of high frequncy data from the Chinese mainland stock market, our first-high-low-last price based test identifies more common jumps than the return based test in this emerging market.