Stochastic Conditional Duration Model with a Mixture-of-Normal Error Distribution: Theoretical Properties and Monte-Carlo Results

Posted: 2 Apr 2013

See all articles by Dinghai Xu

Dinghai Xu

Independent

John Knight

University of Western Ontario, Faculty of Social Science, Deparment of Economics (Deceased)

Tony S. Wirjanto

University of Waterloo - School of Accounting and Finance; University of Waterloo, Department of Statistics & Actuarial Science

Date Written: April 1, 2013

Abstract

This paper provides theoretical properties and Monte-Carlo studies of a stochastic conditional duration model with mixture-of-normal error distributions an effcient estimation approach via a continuous empirical characteristic function. The empirical version of this paper is studied in Xu, Knight, and Wirjanto (2011). The proposed model is shown to be capable of capturing various density shapes of the expected duration of financial trades as well as accommodating various types of dependence structure between the error processes. Detailed Monte-Carlo results are provided to assess the performance of the proposed model and estimation approach.

Keywords: Stochastic Conditional Duration Model, Autoregressive Conditional Duration Model, Leverage Effect, Discrete Mixtures of Normal, Empirical Characteristic Function

JEL Classification: C22, C53, G19

Suggested Citation

Xu, Dinghai and Knight, John L. and Wirjanto, Tony S., Stochastic Conditional Duration Model with a Mixture-of-Normal Error Distribution: Theoretical Properties and Monte-Carlo Results (April 1, 2013). Available at SSRN: https://ssrn.com/abstract=2242921

Dinghai Xu

Independent ( email )

John L. Knight

University of Western Ontario, Faculty of Social Science, Deparment of Economics (Deceased)

Tony S. Wirjanto (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)

HOME PAGE: http://https://uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

University of Waterloo, Department of Statistics & Actuarial Science ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)
519-746-1875 (Fax)

HOME PAGE: http://math.uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

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