BNSjumptest: Barndorff- Nielsen and Shephard (2006) tests for the presence...

In jonathancornelissen/highfrequencyGSOC: All code written during GSOC 2013 by Giang Nguyen

Description

This test examines the presence of jumps in highfrequency price series. It is based on theory of Barndorff- Nielsen and Shephard (BNS). The null hypothesis is no jumps. Depending on users' choices of estimator (integrated variance (IVestimator), integrated quarticity (IQestimator)), mechanism (linear, ratio) and adjustment (logarith), the function returns the result. Function returns three outcomes: 1.z-test value 2.critical value(with confidence level of 95%) and 3.pvalue of the test.

Assume there is N equispaced returns in period t.

Assume the Realized variance (RV), IVestimator and IQestimator are based on N equispaced returns.

Let r_{t,i} be a return (with i=1, …,N) in period t.

Then the BNSjumptest is given by:

\mbox{BNSjumptest}= \frac{RV - IVestimator}{√{(θ-2)\frac{1}{N} {IQestimator}}}

in which, IVestimator can be: bipower variance (BV), minRV, medRV. IQestimator can be: tripower quarticity (TP), quadpower quarticity (QP), minRQ, medRQ.

θ: depends on IVestimator. (Huang and Tauchen (2005))

Usage

BNSjumptest(rdata, IVestimator= "BV", IQestimator= "TP", type= "linear", logtransform= FALSE, 
            max= FALSE, align.by= NULL, align.period= NULL, makeReturns = FALSE, ...)

Arguments

rdata	a zoo/xts object containing all returns in period t for one asset.
IVestimator	can be chosen among jump robust integrated variance estimators: BV, minRV, medRV and corrected threshold bipower variation (CTBV). If CTBV is chosen, an argument of startV, start point of auxiliary estimators in threshold estimation (Corsi et al. (2010) can be included. BV by default.
IQestimator	can be chosen among jump robust integrated quarticity estimators: TP, QP, minRQ and medRQ. TP by default.
type	a method of BNS testing: can be linear or ratio. Linear by default.
logtransform	boolean, should be TRUE when QVestimator and IVestimator are in logarith form. FALSE by default.
max	boolean, should be TRUE when max adjustment in SE. FALSE by default.
align.by	a string, align the tick data to "seconds"|"minutes"|"hours"
align.period	an integer, align the tick data to this many [seconds|minutes|hours].
makeReturns	boolean, should be TRUE when rdata contains prices instead of returns. FALSE by default.
...	additional arguments.

Details

The theoretical framework underlying jump test is that the logarithmic price process X_t belongs to the class of Brownian semimartingales, which can be written as:

\mbox{X}_{t}= \int_{0}^{t} a_udu + \int_{0}^{t}σ_{u}dW_{u} + Z_t

where a is the drift term, σ denotes the spot volatility process, W is a standard Brownian motion and Z is a jump process defined by:

\mbox{Z}_{t}= ∑_{j=1}^{N_t}k_j

where k_j are nonzero random variables. The counting process can be either finite or infinite for finite or infinite activity jumps.

Since the realized volatility converges to the sum of integrated variance and jump variation, while the robust IVestimator converges to the integrated variance, it follows that the difference between RV_{t,N} and the IVestimator captures the jump part only, and this observation underlines the BNS test for jumps. (Theodosiou& Zikes(2009))

Value

list

Author(s)

Giang Nguyen, Jonathan Cornelissen and Kris Boudt

References

Barndorff-Nielsen, O. E., & Shephard, N. (2006). Econometrics of testing for jumps in financial economics using bipower variation. Journal of financial Econometrics, 4(1), 1-30.

Corsi, F., Pirino, D., & Reno, R. (2010). Threshold bipower variation and the impact of jumps on volatility forecasting. Journal of Econometrics, 159(2), 276-288.

Huang, X., & Tauchen, G. (2005). The relative contribution of jumps to total price variance. Journal of financial econometrics, 3(4), 456-499.

Theodosiou, M., & Zikes, F. (2009). A comprehensive comparison of alternative tests for jumps in asset prices. Unpublished manuscript, Graduate School of Business, Imperial College London.

Examples

data(sample_tdata)
BNSjumptest(sample_tdata$PRICE, QVestimator= "RV", IVestimator= "minRV", 
            IQestimator = "medRQ", type= "linear", makeReturns = TRUE)

jonathancornelissen/highfrequencyGSOC documentation built on May 19, 2019, 7:28 p.m.