Jump Detection and Analysis Investigation of Media/Telecomm Industry

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Presentation transcript:

Jump Detection and Analysis Investigation of Media/Telecomm Industry Prad Nadakuduty Presentation 2 2/20/08

Introduction Investigate Media/Telecomm Industry Verizon Telecommunications (VZ) AT&T Inc. (T) Walt Disney Inc. (DIS) Data taken from 1/2/2001 to 12/29/2006 5 min interval (78 observations per day) Over ~100K total observations Qualitative findings linking clusters of jumps to industry events / macroeconomic shocks

Mathematical Background Realized Variation (IV with jump contribution) Bipower Variation (robust to jumps)

Mathematical Background Tri-Power Quarticity Z Tri-Power Max Statistic Significance Value .999  z > 3.09

Mathematical Background Previous equations used to estimate integrated quarticity Relative Jump (measure of jump contribution to total price variance)

Verizon Communications (VZ) 5 min Price Data High: 57.40 7/19/2001 Low: 26.16 7/24/2002

Verizon Communications (VZ) Z-tp Max Statistic 8/24/2004 Explanation? Won civil case against text message spammer Acquisition of MCI 6 months later

Walt Disney Inc. (DIS) 5 min Price Data High: 34.88 12/19/2006 Low: 13.15 8/8/2002

Walt Disney Inc. (DIS) Z-tp Max Statistic 5/11/2005 Explanation? Launch of 50 year celebration at theme parks Released positive earning statements from film/DVD earnings

AT&T (T) 5 min Price Data High: 43.95 7/12/2001 Low: 13.50 4/16/2003

AT&T (T) Z-tp Max Statistic 9/23/2003 Explanation? Rumors of merger with BellSouth Acquires assets from MCI-WorldCom bankruptcy

Summary Statistics Tri-power Quarticity and Max Statistic Mean Std. Dev. Max Min Num of jumps Jump Day %tage Verizon (VZ) .5623 1.3690 7.3393 -3.3541 55 N = 1491 (3.68%) Disney (DIS) .5832 1.3185 5.4364 -2.9944 61 N = 1492 (4.09%) AT&T (T) 0.6523 1.4104 7.6598 -2.8460 70 N= 1486 (4.71%) Tri-power Quarticity and Max Statistic Significance Level .999  z = 3.09

Further Exploration Analyze correlation of prices and returns Within industry With S&P 500 Determine HAR-RV-CJ Forecasts Investigate effect of acquisitions within firms and across industry Correlation between (relative) size of acquisition and size/frequency of nearby jumps?