1. Jump Detection and Analysis Investigation 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
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
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
9/23/2003
Explanation?
Rumors of merger with BellSouth
Acquires assets from MCI-WorldCom bankruptcy

12. 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 55
N = 1491
(3.68%)
Disney (DIS)
.5832
1.3185
5.4364 61
N = 1492
(4.09%)
AT&T (T)
0.6523
1.4104
7.6598 70
N= 1486
(4.71%)
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?