Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data

By Journal of Economic Literature 23 Sep 2016

Abstract This paper reports some of the recent developments in the econometric analysis of semimartingales estimated using high frequency financial returns. It describes a simple yet powerful methodology to decompose asset returns sampled at high frequency into their base components (continuous, small jumps, large jumps), determine the relative magnitude of the components, and analyze the finer characteristics of these components such as the degree of activity of the jumps. We incorporate to effect of market microstructure noise on the test statistics, apply the methodology to high frequency individual stock returns, transactions and quotes, stock index returns and compare the qualitative features of the estimated process for these different data and discuss the economic implications of the results.( JEL C58, G12, G13)

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Journal of Economic Literature

The Journal of Economic Literature is a peer-reviewed academic journal on economy published by the American Economic Association. It was established in 1963 as the Journal of Economic Abstracts. As a review journal, it mainly features essays and reviews of recent economic theories (as opposed to the latest research). Its current editor in chief is Steven Durlauf.

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