Journal of Financial Econometrics 

About: Journal of Financial Econometrics is an academic journal published by Oxford University Press. The journal publishes majorly in the area(s): Volatility (finance) & Estimator. It has an ISSN identifier of 1479-8409. Over the lifetime, 521 publications have been published receiving 25809 citations.

A Simple Approximate Long-Memory Model of Realized Volatility

Abstract: The paper proposes an additive cascade model of volatility components defined over different time periods. This volatility cascade leads to a simple AR-type model in the realized volatility with the feature of considering different volatility components realized over different time horizons and thus termed Heterogeneous Autoregressive model of Realized Volatility (HAR-RV). In spite of the simplicity of its structure and the absence of true long-memory properties, simulation results show that the HAR-RV model successfully achieves the purpose of reproducing the main empirical features of financial returns (long memory, fat tails, and self-similarity) in a very tractable and parsimonious way. Moreover, empirical results show remarkably good forecasting performance. (JEL: C13, C22, C51, C53)

Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns

Abstract: This paper proposes a new generalized autoregressive conditionally heteroskedastic (GARCH) process, the asymmetric generalized dynamic conditional correlation (AG-DCC) model The AG-DCC process extends previous specifications along two dimensions: it allows for series-specific news impact and smoothing parameters and permits conditional asymmetries in correlation dynamics The AG-DCC specification is well suited to examine correlation dynamics among different asset classes and investigate the presence of asymmetric responses in conditional variances and correlations to negative returns We employ the AG-DCC model to analyze the behavior of international equities and government bonds While equity returns show strong evidence of asymmetries in conditional volatility, little is found for bond returns However, both equities and bonds exhibit asymmetries in conditional correlations, with equities responding stronger than bonds to joint bad news The article also finds that, during periods of financial turmoil, equity market volatilities show important linkages, and conditional equity correlations among regional groups increase dramatically Furthermore, in January 1999 with the introduction of the euro, we document significant evidence of a structural break in correlation although not in

Power and Bipower Variation with Stochastic Volatility and Jumps

Abstract: This article shows that realized power variation and its extension, realized bipower variation, which we introduce here, are somewhat robust to rare jumps. We demonstrate that in special cases, realized bipower variation estimates integrated variance in stochastic volatility models, thus providing a model-free and consistent alternative to realized variance. Its robustness property means that if we have a stochastic volatility plus infrequent jumps process, then the difference between realized variance and realized bipower variation estimates the quadratic variation of the jump component. This seems to be the first method that can separate quadratic variation into its continuous and jump components. Various extensions are given, together with proofs of special cases of these results. Detailed mathematical results are reported in Barndorff-Nielsen and Shephard (2003a).

Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation

Abstract: In this article we provide an asymptotic distribution theory for some nonparametric tests of the hypothesis that asset prices have continuous sample paths We study the behaviour of the tests using simulated data and see that certain versions of the tests have good finite sample behavior We also apply the tests to exchange rate data and show that the null of a continuous sample path is frequently rejected Most of the jumps the statistics identify are associated with governmental macroeconomic announcements Copyright 2006, Oxford University Press

The Relative Contribution of Jumps to Total Price Variance

Abstract: We examine tests for jumps based on recent asymptotic results; we interpret the tests as Hausman-type tests. Monte Carlo evidence suggests that the daily ratio z-statistic has appropriate size, good power, and good jump detection capabilities revealed by the confusion matrix comprised of jump classification probabilities. We identify a pitfall in applying the asymptotic approximation over an entire sample. Theoretical and Monte Carlo analysis indicates that microstructure noise biases the tests against detecting jumps, and that a simple lagging strategy corrects the bias. Empirical work documents evidence for jumps that account for 7% of stock market price variance. Copyright 2005, Oxford University Press.