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Journal of Economic Literature: Vol. 50 No. 4 (December 2012)

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

Article Citation

Aït-Sahalia, Yacine, and Jean Jacod. 2012. "Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data." Journal of Economic Literature, 50(4): 1007-50.

DOI: 10.1257/jel.50.4.1007

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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Authors

Aït-Sahalia, Yacine (Princeton U)
Jacod, Jean (U Paris VI, Pierre and Marie Curie)

JEL Classifications

C58: Financial Econometrics
G12: Asset Pricing; Trading volume; Bond Interest Rates
G13: Contingent Pricing; Futures Pricing; option pricing


Journal of Economic Literature


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