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| Benoît Sévi and César Baena |
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| ''Brownian motion vs. pure-jump processes for individual stocks'' |
| ( 2011, Vol. 31 No.4 ) |
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| Using recent activity signature function methodology developed in Todorov and Tauchen (2010), we provide empirical evidence that individual stocks from the New York Stock Exchange are adequately
represented by a Brownian motion plus medium to large (rare) jumps thus invalidating the pure-jump process hypothesis proposed in numerous contributions. This result improves our understanding of the fine structure of asset prices and has implications for derivatives pricing. |
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| Keywords: asset prices, Brownian motion, jumps, activity signature functions |
JEL: C1 - Econometric and Statistical Methods: General
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| Manuscript Received : Sep 20 2011 | | Manuscript Accepted : Nov 13 2011 |
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