The Identification of Price Jumps
Hanousek, J., Kocenda, E., and Novotny, J.
Monte Carlo Methods and Applications
Vol. 18, Issue 1, pp 53-77.
Abstract
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 (1947) non-parametric test 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.
Link to the journal is here.
Previous version was published as CERGE-EI Working Paper Series, No. 434, 2010, 48 pages. Paper is available for download here.
The extended version (extending the technical details as published above) are in revise and resubmitt for the Journal of Financial Econometrics. The combination of both papers serves as my job market paper (available upon request).
Some additional materials are here.