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Nonparametric specification tests for conditional duration models

  • Fernandes, Marcelo
  • Grammig, Joachim

This paper deals with the estimation and testing of conditional duration models by looking at the density and hazard rate functions. More precisely, we focus on the distance between the parametric density (or hazard rate) function implied by the duration process and its non-parametric estimate. Asymptotic justification is derived using the functional delta method for fixed and gamma kernels, whereas finite sample properties are investigated through Monte Carlo simulations. Finally, we show the practical usefulness of such testing procedures by carrying out an empirical assessment of whether autoregressive conditional duration models are appropriate tools for modelling price durations of stocks traded at the New York Stock Exchange

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 502.

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Date of creation: 06 Oct 2003
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Handle: RePEc:fgv:epgewp:502
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