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Jump Detection and Analysis Investigation of Media/Telecomm Industry

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

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Jump Detection and Analysis Investigation of Media/Telecomm Industry

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  1. Jump Detection and AnalysisInvestigation of Media/Telecomm Industry Prad Nadakuduty Presentation 2 2/20/08

  2. 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

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

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

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

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

  7. Verizon Communications (VZ)Z-tp Max Statistic Max: 7.3393 • 8/24/2004 Explanation? • Won civil case against text message spammer • Acquisition of MCI 6 months later

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

  9. Walt Disney Inc. (DIS)Z-tp Max Statistic Max: 5.4364 • 5/11/2005 Explanation? • Launch of 50 year celebration at theme parks • Released positive earning statements from film/DVD earnings

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

  11. AT&T (T)Z-tp Max Statistic Max: 7.6598 • 9/23/2003 Explanation? • Rumors of merger with BellSouth • Acquires assets from MCI-WorldCom bankruptcy

  12. Summary Statistics Tri-power Quarticity and Max Statistic Significance Level .999  z = 3.09

  13. 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?

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