The Third Generation ACD Model: A Semiparametric Approach

39 Pages Posted: 23 Jul 2008

See all articles by Pipat Wongsaart

Pipat Wongsaart

University of Western Australia; University of Adelaide

Jiti Gao

Monash University - Department of Econometrics & Business Statistics

David E. Allen

School of Mathematics and Statistics, The University of Sydney; Financial Research Network (FIRN); Department of Finance; School of Business and Law, Edith Cowan University

Date Written: July 19, 2008

Abstract

Having concluded that thus far the question about the most appropriate type of nonlinear ACD model has not been satisfactorily answered, we intend to develop a novel ACD modelling methodology based on an iterative estimation algorithm and a semiparametric autoregressive process that not only allows the data to speak for itself, but also is robust across datasets without relying on some computational factors, such as the hypothesis about the probability density function of the standardised durations. We propose in this paper the Semiparametric ACD (SP-ACD) model, which can be considered a starting point of such a development. To address the problem about the unobservability of the conditional durations in practice, the current paper devises an iterative algorithm to estimate the unknown conditional duration process. In such a circumstance, it is essential to provide not only the mathematical justification of the estimation scheme, but also sound asymptotic results about the semiparametric and the adaptive data-driven estimators. This paper focuses mainly on the former and also on a number of simulation experiments, while the later is left for future study.

Keywords: Semiparametric ACD model, Conditional durations, Simulations

JEL Classification: G12, C14

Suggested Citation

Wongsaart, Pipat and Gao, Jiti and Allen, David Edmund, The Third Generation ACD Model: A Semiparametric Approach (July 19, 2008). Available at SSRN: https://ssrn.com/abstract=1163289 or http://dx.doi.org/10.2139/ssrn.1163289

Pipat Wongsaart

University of Western Australia ( email )

Crawley, Western Australia
Australia

University of Adelaide

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

Jiti Gao

Monash University - Department of Econometrics & Business Statistics ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
61399031675 (Phone)
61399032007 (Fax)

HOME PAGE: http://www.jitigao.com

David Edmund Allen (Contact Author)

School of Mathematics and Statistics, The University of Sydney ( email )

School of Mathematics and Statistics F07
University of Sydney
Sydney, New South Wales 2006
Australia

HOME PAGE: http://www.maths.usyd.edu.au

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Department of Finance ( email )

Taiwan
Taiwan

School of Business and Law, Edith Cowan University

100 Joondalup Drive
Joondalup, WA 6027
Australia

HOME PAGE: http://www.dallenwapty.com

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