TY  - JOUR
AU  - Andersen,Torben G.
AU  - Bollerslev,Tim
AU  - Dobrev,Dobrislav
TI  - No-Arbitrage Semi-Martingale Restrictions for Continuous-Time Volatility Models subject to Leverage Effects, Jumps and i.i.d. Noise: Theory and Testable Distributional Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12963
PY  - 2007
Y2  - March 2007
UR  - http://www.nber.org/papers/w12963
L1  - http://www.nber.org/papers/w12963.pdf
N1  - Author contact info:
Torben G. Andersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1285
Fax: 847/491-5719
E-Mail: t-andersen@kellogg.northwestern.edu

Tim Bollerslev
Department of Economics
Duke University
Box 90097
Durham, NC 27708-0097
Tel: 919/660-1846
Fax: 919/684-8974
E-Mail: boller@econ.duke.edu

Dobrislav Dobrev
Federal Reserve Board of Governors
20th Street and Constitution Avenue NW
Washington, DC 20551
E-Mail: Dobrislav.P.Dobrev@frb.gov
AB  - We develop a sequential procedure to test the adequacy of jump-diffusion models for return distributions. We rely on intraday data and nonparametric volatility measures, along with a new jump detection technique and appropriate conditional moment tests, for assessing the import of jumps and leverage effects. A novel robust-to-jumps approach is utilized to alleviate microstructure frictions for realized volatility estimation. Size and power of the procedure are explored through Monte Carlo methods. Our empirical findings support the jump-diffusive representation for S&P500 futures returns but reveal it is critical to account for leverage effects and jumps to maintain the underlying semi-martingale assumption.
ER  -