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A family of autoregressive conditional duration models

  • Fernandes, Marcelo
  • Grammig, Joachim

This paper develops a family of autoregressive conditional duration (ACD) models that encompasses most specifications in the literature. The nesting relies on a Box-Cox transformation with shape parameter [delta] to the conditional duration process anda possibly asymmetric shocks impact curve. We establish conditions for the existence of higher-order moments, strict stationarity, geometric ergodicity and [beta]-mixing property with exponential decay. We next derive moment recursion relations and the autocovariance function of the power [delta] of the duration process. Finally, we assess the practical usefulness of our family of ACD models using NYSE price duration data on the IBM stock. While the in-sample results warrant the extra flexibility provided either by the Box-Cox transformation or by the asymmetric response to shocks, we find no specification that entails satisfactory out-of-sample performance.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 130 (2006)
Issue (Month): 1 (January)
Pages: 1-23

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Handle: RePEc:eee:econom:v:130:y:2006:i:1:p:1-23
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