A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities
Francis X. Diebold
University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)
University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR)
May 7, 2012
PIER Working Paper No. 12-020
We propose and illustrate a Markov-switching multi-fractal duration (MSMD) model for analysis of inter-trade durations in financial markets. We establish several of its key properties with emphasis on high persistence (indeed long memory). Empirical exploration suggests MSMD's superiority relative to leading competitors.
Number of Pages in PDF File: 62
Keywords: High-frequency trading data, point process, long memory, time deformation, scaling law, self-similarity, regime-switching model, market microstructure, liquidity
JEL Classification: C41, C22, G1working papers series
Date posted: May 10, 2012
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