Jump Detection and Analysis Investigation of Media/Telecomm Industry

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)
• ATT 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 gt 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
ATT (T)5 min Price Data

• High 43.95
• 7/12/2001
• Low 13.50
• 4/16/2003

11
ATT (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
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)
ATT (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

13
Further Exploration

• Analyze correlation of prices and returns
• Within industry
• With SP 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?