Modeling high-frequency financial data by pure jump processes
Bing-Yi Jing, Xin-Bing Kong, Zhi Liu
The Annals of Statistics · 2012 · Volume 40 · Issue 2
Abstract
It is generally accepted that the asset price processes contain jumps. In fact, pure jump models have been widely used to model asset prices and/or stochastic volatilities. The question is: is there any statistical evidence from the high-frequency financial data to support using pure jump models alone? The purpose of this paper is to develop such a statistical test against the necessity of a diffusion component. The test is very simple to use and yet effective. Asymptotic properties of the proposed test statistic will be studied. Simulation studies and some real-life examples are included to illustrate our results.
Keywords
60G20, 60J75, 62G20, 62M05, diffusion, high-frequency data, Hypothesis testing, pure jump process, semi-martingales
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