The dynamic mixed hitting-time model for multiple transaction prices and times

Eric Renault, Thijs van der Heijden and Bas J.M. Werker

Journal of Econometrics, 2014, vol. 180, issue 2, 233-250

Abstract: We propose a structural model for durations between events and (a vector of) associated marks, using a multivariate Brownian motion. Successive passage times of one latent Brownian component relative to random boundaries define durations. The other, correlated, Brownian components generate the marks. Our model embeds the class of stochastic conditional (SCD) and autoregressive conditional (ACD) duration models, which impose testable restrictions on the relation between the conditional expectation and conditional volatility of durations. We strongly reject the SCD and ACD specifications for both a very liquid and less liquid NYSE-traded stock, and characterize causality relations between volatilities and durations.

Keywords: Duration modeling; Hitting time; Trading intensity; Market microstructure (search for similar items in EconPapers)
JEL-codes: C41 G12 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:180:y:2014:i:2:p:233-250

DOI: 10.1016/j.jeconom.2014.01.009

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