Econometric analysis of financial trade processes by discrete mixture duration models

Reinhard Hujer, Sandra Vuletić
2007 Journal of Economic Dynamics and Control  
We propose a new framework for modelling the time dependence in duration processes being in force on financial markets. The pioneering ACD model introduced by Engle and Russell (1998) will be extended in a manner that the duration process will be accompanied by an unobservable stochastic process. The Discrete Mixture ACD framework provides us with a general methodology which puts the idea into practice. It is established by introducing a discrete-valued latent regime variable which can be
more » ... ied in the light of recent market microstructure theories. The empirical application demonstrates its ability to capture specific characteristics of intraday transaction durations while alternative approaches fail.
doi:10.1016/j.jedc.2005.09.015 fatcat:rhfrg32csfad7im7tocr6yeuxy