Semiparametric estimation of duration models when the parameters are subject to inequality constraints and the error distribution is unknown
The parameters in duration models are usually estimated by a Quasi Maximum Likelihood Estimator [QMLE]. This estimator is efficient if the errors are iid and exponentially distributed. Otherwise, it may not be the most efficient. Motivated by this, a class of estimators has been introduced by Drost and Werker (2004). Their estimator is asymptotically most efficient when the error distribution is unknown. However, the practical relevance of their method remains to be evaluated. Further, although some parameters in several common duration models are known to be nonnegative, this estimator may turn out to be negative. This paper addresses these two issues. We propose a new semiparametric estimator when there are inequality constraints on parameters, and a simulation study evaluates the two semiparametric estimators. The results lead us to conclude the following when the error distribution is unknown: (i) If there are no inequality constraints on parameters then the Drost-Werker estimator is better than the QMLE, and (ii) if there are inequality constraints on parameters then the estimator proposed in this paper is better than the Drost-Werker estimator and the QMLE. In conclusion, this paper recommends estimators that are better than the often used QMLE for estimating duration models.
|Date of creation:||Jan 2008|
|Date of revision:|
|Contact details of provider:|| Postal: PO Box 11E, Monash University, Victoria 3800, Australia|
Phone: +61 3 99052489
Fax: +61 3 99055474
Web page: http://business.monash.edu/econometrics-and-business-statistics
More information through EDIRC
|Order Information:|| Web: http://business.monash.edu/econometrics-and-business-statistics Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hammou El Barmi & Hari Mukerjee, 2005. "Inferences Under a Stochastic Ordering Constraint: The k-Sample Case," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 252-261, March.
- BAUWENS, Luc & ROMBOUTS, Jeroen V.K., .
CORE Discussion Papers RP
1713, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- FERNANDES, Marcelo & GRAMMIG, Joachim, 2001.
"A family of autoregressive conditional duration models,"
CORE Discussion Papers
2001036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fernandes, Marcelo & Grammig, Joachim, 2006. "A family of autoregressive conditional duration models," Journal of Econometrics, Elsevier, vol. 130(1), pages 1-23, January.
- Fernandes, Marcelo & Grammig, Joachim, 2003. "A family of autoregressive conditional duration models," Economics Working Papers (Ensaios Economicos da EPGE) 501, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Fernandes, Marcelo & Grammig, Joachim, 2002. "A family of autoregressive conditional duration models," Economics Working Papers (Ensaios Economicos da EPGE) 440, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- repec:adr:anecst:y:2000:i:60:p:05 is not listed on IDEAS
- Drost, F.C. & Werker, B.J.M., 2001.
"Semiparametric Duration Models,"
2001-11, Tilburg University, Center for Economic Research.
- Shyamal D. Peddada & David B. Dunson & Xiaofeng Tan, 2005. "Estimation of order-restricted means from correlated data," Biometrika, Biometrika Trust, vol. 92(3), pages 703-715, September.
- Drost, F.C. & Werker, B.J.M., 2004. "Semiparametric duration models," Other publications TiSEM a1895e3e-f720-454b-9613-f, Tilburg University, School of Economics and Management.
- Newey, Whitney K, 1990. "Semiparametric Efficiency Bounds," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(2), pages 99-135, April-Jun.
- Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
- Shyamal D. Peddada & Joseph K. Haseman & Xiaofeng Tan & Greg Travlos, 2006. "Tests for a simple tree order restriction with application to dose-response studies," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 55(4), pages 493-506.
- Engle, Robert F. & Russell, Jeffrey R., 1997. "Forecasting the frequency of changes in quoted foreign exchange prices with the autoregressive conditional duration model," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 187-212, June.
When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2008-1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xibin Zhang)
If references are entirely missing, you can add them using this form.