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A comparison of financial duration models via density forecasts

  • BAUWENS, Luc
  • GIOT, Pierre
  • GRAMMIG, Joachim
  • VEREDAS, David

Using density forecasts, we compare the predictive performance of duration models that have been developed for modelling intra-day data on stock markets. The compared models are the autoregressive conditional duration (ACD) models, their logarithmic versions, in each case with three distributions (Burr, Weibull, and exponential), and the stochastic volatility duration (SVD) model. A pilot Monte Carlo study is conducted to illustrate the relevance of the approach. The evaluation is done on transaction, price, and volume durations of 4 stocks listed at the NYSE. The results lead us to conclude that ACD and Log-ACD models often capture the dependence in the data in a satisfactory way, that they fit correctly the distribution of volume durations, that they fail to do so for trade durations, while the evidence is mixed for price durations.

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File URL: http://dx.doi.org/10.1016/j.ijforecast.2003.09.014
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1746.

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Handle: RePEc:cor:louvrp:-1746
Note: In : International Journal of Forecasting, 20, 589-609, 2004
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  1. Gourieroux, Christian & Jasiak, Joanna & Le Fol, Gaelle, 1999. "Intra-day market activity," Journal of Financial Markets, Elsevier, vol. 2(3), pages 193-226, August.
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  12. Luc Bauwens & David Veredas, 2004. "The stochastic conditional duration model: a latent factor model for the analysis of financial durations," ULB Institutional Repository 2013/136234, ULB -- Universite Libre de Bruxelles.
  13. Eric Ghysels & Christian Gourieroux & Joanna Jasiak, 1997. "Stochastic Volatility Duration Models," Working Papers 97-46, Centre de Recherche en Economie et Statistique.
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  21. Fernandes, Marcelo & Grammig, Joachim, 2003. "Nonparametric specification tests for conditional duration models," Economics Working Papers (Ensaios Economicos da EPGE) 502, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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