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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Identifying the Underlying Components of High-Frequency Data
T2 - Pure vs Jump Diffusion Processes
AU - Hizmeri, Rodrigo
AU - Izzeldin, Marwan
AU - Urga, Giovanni
PY - 2025/3/31
Y1 - 2025/3/31
N2 - In this paper, we examine the finite sample properties of test statistics designed to identify distinct underlying components of high-frequency financial data, specifically the Brownian component and infinite vs. finite activity jumps. We conduct a comprehensive set of Monte Carlo simulations to evaluate the tests under various types of microstructure noise, price staleness, and different levels of jump activity. We apply these tests to a dataset comprising 100 individual S&P 500 constituents from diverse business sectors and the SPY (S&P 500 ETF) to empirically assess the relative magnitude of these components. Our findings strongly support the presence of both Brownian and jump components. Furthermore, we investigate the time-varying nature of rejection rates and we find that periods with more jumps days are usually associated with an increase in infinite jumps and a decrease infinite jumps. This suggests a dynamic interplay between jump components over time.
AB - In this paper, we examine the finite sample properties of test statistics designed to identify distinct underlying components of high-frequency financial data, specifically the Brownian component and infinite vs. finite activity jumps. We conduct a comprehensive set of Monte Carlo simulations to evaluate the tests under various types of microstructure noise, price staleness, and different levels of jump activity. We apply these tests to a dataset comprising 100 individual S&P 500 constituents from diverse business sectors and the SPY (S&P 500 ETF) to empirically assess the relative magnitude of these components. Our findings strongly support the presence of both Brownian and jump components. Furthermore, we investigate the time-varying nature of rejection rates and we find that periods with more jumps days are usually associated with an increase in infinite jumps and a decrease infinite jumps. This suggests a dynamic interplay between jump components over time.
U2 - 10.1016/j.jempfin.2025.101594
DO - 10.1016/j.jempfin.2025.101594
M3 - Journal article
VL - 81
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
SN - 0927-5398
IS - 3
M1 - 101594
ER -