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A nonparametric ACD model
Cosma, Antonio; Galli, Fausto
2019In Chevalier, Julien; Goutte, Stephane; Guerreiro, David et al. (Eds.) Financial Mathematics, Volatility and Covariance Modelling
 

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Keywords :
ACD; nonparametric; trade durations; local-linear; intraday seasonality
Abstract :
[en] We propose a fully nonparametric approach to the analysis of the Autocorrelated Conditional Duration (ACD) process applied to durations between financial events. We use a recursive algorithm to estimate the nonparametric specification. In a Monte Carlo experiment, we analyse its forecasting performance and compare it with a correctly and a mis-specified parametric estimator. On a real dataset, the nonparametric estimator seems to mildly overperform in terms of predictive power. The nonparametric analysis can also provide guidance on the choice between alternative parametric specifications. In particular, once intraday seasonality is directly modelled in the conditional duration function, the nonparametric approach provides insights into the time-varying nature of the dynamics in the model that the standard procedures of deseasonalization may lead one to overlook.
Disciplines :
Quantitative methods in economics & management
Author, co-author :
Cosma, Antonio ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Galli, Fausto;  Università di Salerno
External co-authors :
yes
Language :
English
Title :
A nonparametric ACD model
Publication date :
June 2019
Main work title :
Financial Mathematics, Volatility and Covariance Modelling
Author, co-author :
Chevalier, Julien
Goutte, Stephane
Guerreiro, David
Saglio, Sophie
Sanhaji, Bilel
Publisher :
Routledge, Taylor \& Francis, London, United Kingdom
ISBN/EAN :
9781315162737
Collection name :
Routledge Advances in Applied Financial Economics; 2
Pages :
122-144
Focus Area :
Finance
Available on ORBilu :
since 16 July 2019

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