Econometric analysis of financial trade processes by discrete mixture duration models

  • We propose a new framework for modelling the time dependence in duration processes being in force on financial markets. The pioneering ACD model introduced by Engle and Russell (1998) will be extended in a manner that the duration process will be accompanied by an unobservable stochastic process. The Discrete Mixture ACD framework provides us with a general methodology which puts the idea into practice. It is established by introducing a discrete-valued latent regime variable which can be justified in the light of recent market microstructure theories. The empirical application demonstrates its ability to capture specific characteristics of intraday transaction durations while alternative approaches fail. JEL classification: C41, C22, C25, C51, G14.

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Author:Reinhard HujerGND, Sandra Vuletić
Document Type:Report
Date of Publication (online):2005/11/21
Year of first Publication:2005
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/11/21
Tag:duration models; financial transaction data; market microstructure; mixture models; time series models
Issue:Revised version: 4 July 2005
Page Number:38
Source:Revised version: 4 July 2005 ,
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht