A Dynamic Semiparametric Proportional Hazard Model
AbstractThis paper proposes a dynamic proportional hazard (PH) model with non-specified baseline hazard for the modelling of autoregressive duration processes. By employing a categorization of the underlying durations we reformulate the PH model as an ordered response model based on extreme value distributed errors. In order to capture persistent serial dependence in the duration process, we extend the model by an observation driven ARMA dynamic based on generalized errors. We illustrate the maximum likelihood estimation of both the model parameters and discrete points of the underlying unspecified baseline survivor function. The dynamic properties of the model as well as the estimation quality are investigated in a Monte Carlo study. It is illustrated that the model is a useful approach to estimate conditional failure probabilities based on (persistent) serially dependent duration data which might be subject to censoring mechanisms. In an empirical study based on financial transaction data we apply the model to estimate conditional asset price change probabilities. An evaluation of the forecasting properties of the model shows that the proposed approach is a promising competitor to well-established ACD type models.
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Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 11 (2007)
Issue (Month): 2 ()
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Web page: http://www.degruyter.com
Other versions of this item:
- Frank Gerhard & Nikolaus Hautsch, 2006. "A Dynamic Semiparametric Proportional Hazard Model," FRU Working Papers 2006/05, University of Copenhagen. Department of Economics. Finance Research Unit.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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