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A new method for jump detection: analysis of jumps in the S&P 500 financial index

Khaldoun Khashanah, Jing Chen Orcid Logo, Mike Buckle Orcid Logo, Alan Hawkes

Journal of the Royal Statistical Society Series C: Applied Statistics

Swansea University Authors: Mike Buckle Orcid Logo, Alan Hawkes

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DOI (Published version): 10.1093/jrsssc/qlaf025

Abstract

Financial jumps have occurred more frequently with the advent of high-frequency trading enabled by technological advancement. Most existing jump detection methods that treat a jump as a singular, random, and isolated shock event were not designed to capture the clustering of jumps related to contagi...

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Published in: Journal of the Royal Statistical Society Series C: Applied Statistics
ISSN: 0035-9254 1467-9876
Published: Oxford University Press (OUP) 2025
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URI: https://cronfa.swan.ac.uk/Record/cronfa69118
Abstract: Financial jumps have occurred more frequently with the advent of high-frequency trading enabled by technological advancement. Most existing jump detection methods that treat a jump as a singular, random, and isolated shock event were not designed to capture the clustering of jumps related to contagious behaviour, in which the occurrence of jumps increases the probability of further jumps soon after. This paper presents a new Med9 method that addresses the challenges of capturing both singular and consecutive jumps. This approach evaluates the size of individual returns with a measure of local volatility based on the median of consecutive absolute returns. We use this method to detect jumps in both S&P 500 and simulated time series, and compare its performance with several classic jump detection methods. Throughout, our Med9 consistently outperforms other approaches applied to both real and simulated financial return series. In addition, we demonstrate that the Med9 detection results are not biased or compromised by the intraday volatility pattern.
Keywords: contagion, financial series, jumps, S&P 500 index, volatility
College: Faculty of Humanities and Social Sciences

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