In an arbitrage-free financial market, asset prices  should not exhibit jumps of a predictable magnitude at predictable times. We provide a rigorous formulation of this result in a fully general setting, only allowing for buy-and-hold positions and without imposing any semimartingale restriction . We show that asset prices do not exhibit predictable jumps if and only if there is no possibility of obtaining sure profits via high-frequency limits of buy-and-hold trading strategies. Our results imply that, under minimal assumptions, price changes occurring at scheduled dates should only be due to unanticipated information releases.
In an arbitrage-free financial market, asset prices (including dividends) should not exhibit jumps of a predictable magnitude at predictable times. We provide a rigorous formulation of this result in a fully general setting, without imposing any semimartingale restriction and only allowing for buy-and-hold positions. We prove that asset prices do not exhibit predictable jumps if and only if there is no possibility of obtaining sure profits via high-frequency limits of buy-and-hold trading strategies. We furthermore show that right-continuity is an indispensable requirement for any price process that does not admit sure profits. Our results are robust with respect to transaction costs or model mis-specifications and imply that, under minimal assumptions, price changes occurring at scheduled dates should only be due to unanticipated information releases.
A
(including dividends)
D
only allowing for buy-and-hold positions and
R
. We show
and only allowing for buy-and-hold positions. We prove
R
Our results
We furthermore show that right-continuity is an indispensable requirement for any price process that does not admit sure profits. Our results are robust with respect to transaction costs or model mis-specifications and