A (semi-)parametric functional coefficient autoregressive conditional duration model

Marcelo Fernandes, Marcelo Medeiros () and Alvaro Veiga
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Alvaro Veiga: Department of Economics,PUC-Rio

No 535, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: In this paper, we propose a class of ACD-type models that accommodates overdispersion, intermittent dynamics, multiple regimes, and sign and size asymmetries in financial durations. In particular, our functional coefficient autoregressive conditional duration (FC-ACD) model relies on a smooth-transition autoregressive specification. The motivation lies on the fact that the latter yields a universal approximation if one lets the number of regimes grows without bound. After establishing that the sufficient conditions for strict stationarity do not exclude explosive regimes, we address model identifiability as well as the existence, consistency, and asymptotic normality of the quasi-maximum likelihood (QML) estimator for the FC-ACD model with a fixed number of regimes. In addition, we also discuss how to consistently estimate using a sieve approach a semiparametric variant of the FC-ACD model that takes the number of regimes to infinity. An empirical illustration indicates that our functional coefficient model is flexible enough to model IBM price durations.

Keywords: explosive regimes; quasi-maximum likelihood; sieve estimation; smooth transition; stationarity. (search for similar items in EconPapers)
JEL-codes: C22 C41 (search for similar items in EconPapers)
Pages: 35p
Date: 2006-12
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: A (semi-)parametric functional coefficient autoregressive conditional duration model (2013)
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