INFERENCE ON SELF-EXCITING JUMPS IN PRICES AND VOLATILITY USING HIGH-FREQUENCY MEASURES
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state-space representation is used to link observed returns, plus nonparametric measures of integrated volatility and price jumps, to the specified model...
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Veröffentlicht in: | Journal of applied econometrics (Chichester, England) England), 2017-04, Vol.32 (3), p.504-532 |
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Hauptverfasser: | , , |
Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state-space representation is used to link observed returns, plus nonparametric measures of integrated volatility and price jumps, to the specified model components, with Bayesian inference conducted using a Markov chain Monte Carlo algorithm. An evaluation of marginal likelihoods for the proposed model relative to a large number of alternative models, including some that have featured in the literature, is provided. An extensive empirical investigation is undertaken using data on the S&P 500 market index over the 1996–2014 period, with substantial support for dynamic jump intensities—including in terms of predictive accuracy—documented. |
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ISSN: | 0883-7252 1099-1255 |
DOI: | 10.1002/jae.2547 |