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Semiparametric autoregressive conditional proportional hazard models

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Abstract

A new semiparametric proportional hazard rate model is proposed which extends standard models to include a dynamic specification. Two main problems are resolved in the course of this paper. First, the partial likelihood approach to estimate the components of a standard proportional hazard model is not available in a dynamic model involving lags of the log integrated baseline hazard. We use a discretisation approach to obtain a semiparametric estimate of the baseline hazard. Second, the log integrated baseline hazard is not observed directly, but only through a threshold function. We employ a special type of observation driven dynamic which allows for a computationally simple maximum likelihood estimation. This specifications approximates a standard ARMA model in the log integrated baseline hazard and is identical if the baseline hazard is known. It is shown that this estimator is quite flexible and easily extended to include unobserved heterogeneity, censoring and state dependent hazard rates. A Monte Carlo study on the approximation quality of the model and an empirical study on BUND future trading at the former DTB complement the paper.

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  • Frank Gerhard & Nikolaus Hautsch, "undated". "Semiparametric autoregressive conditional proportional hazard models," Economics Papers 2002-W2, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:0202
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    File URL: http://www.nuff.ox.ac.uk/economics/papers/2002/w2/sacph.pdf
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    Cited by:

    1. Monteiro, André A., 2009. "The econometrics of randomly spaced financial data: a survey," DES - Working Papers. Statistics and Econometrics. WS ws097924, Universidad Carlos III de Madrid. Departamento de Estadística.

    More about this item

    Keywords

    autoregressive duration models; dynamic ordered response models; generalised residuals; censoring.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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