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Estimation of the stochastic conditional duration model via alternative methods

Author

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  • John Knight
  • Cathy Q. Ning

Abstract

This paper examines the estimation of the Stochastic Conditional Duration model by the empirical characteristic function and the generalized method of moments when maximum likelihood is unavailable. The joint characteristic function for the durations along with general expressions for the moments are derived, leading naturally to estimation via the empirical characteristic function and generalized method of moments. In a Monte Carlo study as well as an empirical application, these alternative methods are compared with quasi maximum likelihood. These experiments reveal that the empirical characteristic function approach outperforms the quasi maximum likelihood and generalized method of moments in terms of both bias and root mean square error. Copyright The Author(s). Journal compilation Royal Economic Society 2008

Suggested Citation

  • John Knight & Cathy Q. Ning, 2008. "Estimation of the stochastic conditional duration model via alternative methods," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 593-616, November.
    • Handle: RePEc:ect:emjrnl:v:11:y:2008:i:3:p:593-616
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    Citations

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    Cited by:

    1. Dinghai Xu & John Knight & Tony S. Wirjanto, 2011. "Asymmetric Stochastic Conditional Duration Model--A Mixture-of-Normal Approach," Journal of Financial Econometrics, Oxford University Press, vol. 9(3), pages 469-488, Summer.
    2. Dingan Feng & Peter X.-K. Song & Tony S. Wirjanto, 2008. "Time-Deformation Modeling Of Stock Returns Directed By Duration Processes," Working Papers 08010, University of Waterloo, Department of Economics.
    3. Dingan Feng & Peter X.-K. Song & Tony S. Wirjanto, 2015. "Time-Deformation Modeling of Stock Returns Directed by Duration Processes," Econometric Reviews, Taylor & Francis Journals, vol. 34(4), pages 480-511, April.
    4. Zhongxian Men & Tony S. Wirjanto & Adam W. Kolkiewicz, 2016. "A Multiscale Stochastic Conditional Duration Model," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 1-28, December.
    5. Luc, BAUWENS & Nikolaus, HAUTSCH, 2006. "Modelling Financial High Frequency Data Using Point Processes," Discussion Papers (ECON - Département des Sciences Economiques) 2006039, Université catholique de Louvain, Département des Sciences Economiques.
    6. Galli, Fausto, 2014. "Stochastic conditonal range, a latent variable model for financial volatility," MPRA Paper 54030, University Library of Munich, Germany.
    7. Zhongxian Men & Adam W. Kolkiewicz & Tony S. Wirjanto, 2019. "Threshold Stochastic Conditional Duration Model for Financial Transaction Data," JRFM, MDPI, vol. 12(2), pages 1-21, May.
    8. Zhongxian Men & Tony S. Wirjanto & Adam W. Kolkiewicz, 2013. "Bayesian Inference of Multiscale Stochastic Conditional Duration Models," Working Paper series 63_13, Rimini Centre for Economic Analysis.
    9. Galli, Fausto, 2014. "Stochastic conditonal range, a latent variable model for financial volatility," MPRA Paper 54841, University Library of Munich, Germany.
    10. Tony S. Wirjanto & Adam W. Kolkiewicz & Zhongxian Men, 2013. "Stochastic Conditional Duration Models with Mixture Processes," Working Paper series 29_13, Rimini Centre for Economic Analysis.
    11. Maria Pacurar, 2008. "Autoregressive Conditional Duration Models In Finance: A Survey Of The Theoretical And Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 711-751, September.
    12. Zhongxian Men & Adam W. Kolkiewicz & Tony S. Wirjanto, 2013. "Bayesian Inference of Asymmetric Stochastic Conditional Duration Models," Working Paper series 28_13, Rimini Centre for Economic Analysis.
    13. Dinghai Xu, 2009. "The Applications of Mixtures of Normal Distributions in Empirical Finance: A Selected Survey," Working Papers 0904, University of Waterloo, Department of Economics, revised Sep 2009.
    14. Simos G. Meintanis & Bojana Milošević & Marko Obradović, 2020. "Goodness-of-fit tests in conditional duration models," Statistical Papers, Springer, vol. 61(1), pages 123-140, February.

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