Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data

Abstract

This paper describes a simple yet powerful methodology to decompose asset returns sampled at high frequency into their base components (continuous, small jumps, large jumps), determine the relative magnitude of the components, and analyze the finer characteristics of these components such as the degree of activity of the jumps.

Keywords: continuous-time models, semimartingales, jumps, volatility, spectrum, high frequency financial returns

JEL Classification: G11