Semiparametric Autoregressive Conditional Duration Model: Theory and Practice

Patrick W. Saart, Jiti Gao and David Allen

Econometric Reviews, 2015, vol. 34, issue 6-10, 849-881

Abstract: Many existing extensions of the Engle and Russell's (1998) Autoregressive Conditional Duration (ACD) model in the literature are aimed at providing additional flexibility either on the dynamics of the conditional duration model or the allowed shape of the hazard function, i.e., its two most essential components. This article introduces an alternative semiparametric regression approach to a nonlinear ACD model; the use of a semiparametric functional form on the dynamics of the duration process suggests the model being called the Semiparametric ACD (SEMI-ACD) model. Unlike existing alternatives, the SEMI-ACD model allows simultaneous generalizations on both of the above-mentioned components of the ACD framework. To estimate the model, we establish an alternative use of the existing B�hlmann and McNeil's (2002) iterative estimation algorithm in the semiparametric setting and provide the mathematical proof of its statistical consistency in our context. Furthermore, we investigate the asymptotic properties of the semiparametric estimators employed in order to ensure the statistical rigor of the SEMI-ACD estimation procedure. These asymptotic results are presented in conjunction with simulated examples, which provide an empirical evidence of the SEMI-ACD model's robust finite-sample performance. Finally, we apply the proposed model to study price duration process in the foreign exchange market to illustrate its usefulness in practice.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1080/07474938.2014.956594 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:emetrv:v:34:y:2015:i:6-10:p:849-881

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/LECR20

DOI: 10.1080/07474938.2014.956594

Access Statistics for this article

Econometric Reviews is currently edited by Dr. Essie Maasoumi

More articles in Econometric Reviews from Taylor & Francis Journals
Bibliographic data for series maintained by ().