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A Markov-switching multifractal inter-trade duration model, with application to US equities

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  • Chen, Fei
  • Diebold, Francis X.
  • Schorfheide, Frank

Abstract

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

Suggested Citation

  • Chen, Fei & Diebold, Francis X. & Schorfheide, Frank, 2013. "A Markov-switching multifractal inter-trade duration model, with application to US equities," Journal of Econometrics, Elsevier, vol. 177(2), pages 320-342.
    • Handle: RePEc:eee:econom:v:177:y:2013:i:2:p:320-342
    DOI: 10.1016/j.jeconom.2013.04.016
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    More about this item

    Keywords

    High-frequency trading data; Point process; Long memory; Time deformation; Regime-switching model; Market microstructure; Liquidity;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G1 - Financial Economics - - General Financial Markets

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