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A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities

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Listed:
  • Chen, Fei

    (Huazhong University of Science and Technology)

  • Diebold, Francis X.

    (University of PA)

  • Schorfheide, Frank

    (University of PA)

Abstract

We propose and illustrate a Markov-switching multi-fractal duration (MSMD) model for analysis of inter-trade durations in financial markets. We establish several of its key properties with emphasis on high persistence (indeed long memory). Empirical exploration suggests MSMD's superiority relative to leading competitors.

Suggested Citation

  • Chen, Fei & Diebold, Francis X. & Schorfheide, Frank, 2012. "A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities," Working Papers 12-09, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:12-09
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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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