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Time-varying autoregressive conditional duration model

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  • Adriana Bortoluzzo
  • Pedro Morettin
  • Clelia Toloi

Abstract

The main goal of this work is to generalize the autoregressive conditional duration (ACD) model applied to times between trades to the case of time-varying parameters. The use of wavelets allows that parameters vary through time and makes possible the modeling of non-stationary processes without preliminary data transformations. The time-varying ACD model estimation was done by maximum-likelihood with standard exponential distributed errors. The properties of the estimators were assessed via bootstrap. We present a simulation exercise for a non-stationary process and an empirical application to a real series, namely the TELEMAR stock. Diagnostic and goodness of fit analysis suggest that the time-varying ACD model simultaneously modeled the dependence between durations, intra-day seasonality and volatility.

Suggested Citation

  • Adriana Bortoluzzo & Pedro Morettin & Clelia Toloi, 2010. "Time-varying autoregressive conditional duration model," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(5), pages 847-864.
    • Handle: RePEc:taf:japsta:v:37:y:2010:i:5:p:847-864
    DOI: 10.1080/02664760902914458
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    References listed on IDEAS

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    Cited by:

    1. Abdelhakim Aknouche & Bader Almohaimeed & Stefanos Dimitrakopoulos, 2022. "Periodic autoregressive conditional duration," Journal of Time Series Analysis, Wiley Blackwell, vol. 43(1), pages 5-29, January.
    2. Yuanhua Feng & Sarah Forstinger & Christian Peitz, 2013. "On the iterative plug-in algorithm for estimating diurnal patterns of financial trade durations," Working Papers CIE 66, Paderborn University, CIE Center for International Economics.
    3. Antonio Cosma & Fausto Galli, 2006. "A Nonparametric ACD Model," LSF Research Working Paper Series 06-10, Luxembourg School of Finance, University of Luxembourg.
    4. Francisco Blasques & Vladim'ir Hol'y & Petra Tomanov'a, 2018. "Zero-Inflated Autoregressive Conditional Duration Model for Discrete Trade Durations with Excessive Zeros," Papers 1812.07318, arXiv.org, revised Jan 2022.

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