TD n. 535 2006

Marcelo Medeiros, Álvaro Veiga, Marcelo Fernandes.

http://dx.doi.org/10.1080/07474938.2014.977071

In this paper, we propose a class of logarithmic ACD-type models that accommodates overdispersion, intermittent dynamics, multiple regimes, and asymmetries in financial durations. In particular, our functional coefficient logarithmic autoregressive conditional duration (FC-LACD) model relies on a smooth-transition autoregressive specification. The motivation lies on the fact that the latter yields a universal approximation if one lets the number of regimes grows without bound. After establishing sufficient conditions for strict stationarity, we address model identifiability as well as the asymptotic properties of the quasi-maximum likelihood (QML) estimator for the FC-LACD model with a fixed number of regimes. In addition, we also discuss how to consistently estimate a semiparametric variant of the FC-LACD model that takes the number of regimes to infinity. An empirical illustration indicates that our functional coefficient model is flexible enough to model IBM price durations.

A ser publicado em Econometric Reviews