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Discretized Time and Conditional Duration Modelling for Stock Transaction Data

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Author Info
Brännäs, Kurt () (Department of Economics, Umeå University)
Simonsen, Ola () (Department of Economics, Umeå University)

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Abstract

The paper considers conditional duration models in which durations are in continuous time but measured in grouped or discretized form. This feature of recorded durations in combination with a frequently traded stock is expected to negatively influence the performance of conventional estimators. A few estimators that account for the discreteness are discussed and compared in a Monte Carlo experiment. An EM-algorithm accounting for the discrete data performs better than those which do not. Empirical results are reported for trading durations in Ericsson B at Stockholmsbörsen for a three-week period of July 2002. The incorporation of level variables for past trading is rejected in favour of change variables. This enables an interpretation in terms of news effects. No evidence of asymmetric responses to news about prices and spreads is found.

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Publisher Info
Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 610.

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Length: 28 pages
Date of creation: 20 May 2003
Date of revision:
Publication status: Published in Applied Financial Economics, 2007, pages 647-658.
Handle: RePEc:hhs:umnees:0610

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Related research
Keywords: Grouped data; Maximum likelihood; EM-algorithm; Estimation; Finance; News;

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
  2. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
  3. Lee, Lung-Fei, 1997. "Simulated maximum likelihood estimation of dynamic discrete choice statistical models some Monte Carlo results," Journal of Econometrics, Elsevier, vol. 82(1), pages 1-35. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Brännäs, Kurt & Quoreshi, Shahiduzzaman, 2004. "Integer-Valued Moving Average Modelling of the Number of Transactions in Stocks," UmeÃ¥ Economic Studies 637, Umeå University, Department of Economics. [Downloadable!]
  2. Simonsen, Ola, 2005. "An Empirical Model for Durations in Stocks," UmeÃ¥ Economic Studies 657, Umeå University, Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-27.

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