1 Department of Marketing and Statistics, Aarhus School of Business, Aarhus BSS, Aarhus University2 Department of Economics and Business Economics, Aarhus BSS, Aarhus University3 Ruhr University of Bochum, Dept. of Probability and Statistics4 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
In this paper, we propose using realized range-based estimation to draw inference about the quadratic variation of jump-diffusion processes. We also construct a new test of the hypothesis that an asset price has a continuous sample path. Simulated data shows that our approach is efficient, the test is well-sized and more powerful than a return-based t-statistic for sampling frequencies normally used in empirical work. Applied to equity data, we find that the intensity of the jump process is not as high as previously reported.