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Qmle Of A Standard Exponential Acd Model: Asymptotic Distribution And Residual Correlation

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  • CHOR-YIU SIN

    (Department of Economics, National Tsing Hua University, Hsinchu, Taiwan 30013, Taiwan)

Abstract

Since the seminal work by Engle and Russell, (1998), numerous studies have applied their standard/linear ACD(m,q) model (autoregressive conditional duration model of orders m and q) to fit the irregular spaced transaction data. Recently, Araichi et al. (2013) also applied the ACD model to claims in insurance. Many of these papers assume that the standardized error follows a standard exponential distribution. In this paper, we derive the asymptotic distribution of the quasi-maximum likelihood estimator (QMLE) when a standard exponential distribution is used. In other words, we provide robust standard errors for an ACD model. Applying this asymptotic theory, we then derive the asymptotic distribution of the corresponding residual autocorrelation.

Suggested Citation

  • Chor-Yiu Sin, 2014. "Qmle Of A Standard Exponential Acd Model: Asymptotic Distribution And Residual Correlation," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-10.
    • Handle: RePEc:wsi:afexxx:v:09:y:2014:i:02:n:s2010495214400090
    DOI: 10.1142/S2010495214400090
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    References listed on IDEAS

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    1. White,Halbert, 1996. "Estimation, Inference and Specification Analysis," Cambridge Books, Cambridge University Press, number 9780521574464, July.
    2. Marcelo Fernandes & Marcelo Cunha Medeiros & Alvaro Veiga, 2006. "A (semi-)parametric functional coefficient autoregressive conditional duration model," Textos para discussão 535, Department of Economics PUC-Rio (Brazil).
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    Cited by:

    1. Giuseppe Cavaliere & Thomas Mikosch & Anders Rahbek & Frederik Vilandt, 2022. "The Econometrics of Financial Duration Modeling," Papers 2208.02098, arXiv.org, revised Dec 2022.
    2. Chia-Lin Chang & Shing-Yang Hu & Shih-Ti Yu, 2014. "Recent Developments In Quantitative Finance: An Overview," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-7.
    3. Cavaliere, Giuseppe & Mikosch, Thomas & Rahbek, Anders & Vilandt, Frederik, 2024. "Tail behavior of ACD models and consequences for likelihood-based estimation," Journal of Econometrics, Elsevier, vol. 238(2).

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    More about this item

    Keywords

    Autoregressive conditional duration (ACD) model; claims in insurance; irregular spaced transaction data; quasi-maximum likelihood estimator (QMLE); residual auto correlation; standard exponential distribution; C12; C22;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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