The Regime Switching Acd Framework: The Use of the Comprehensive Family of Distributions
24 Pages Posted: 5 Aug 2005
Date Written: July 2005
In recent methodological work the well known autoregressive conditional duration approach, originally introduced by Engle and Russell (1998), has been supplemented by the involvement of an unobservable stochastic process which accompanies the underlying process of durations via a discrete mixture of distributions. The Mixture ACD model, emanating from the specialized proposal of De Luca and Gallo (2004), has proved to be a moderate tool for description of financial duration data. The use of the same family of ordinary distributions has been common practice until now. Our contribution incites to use the rich parameterized comprehensive family of distributions which allows for interacting different distributional idiosyncrasies.
Keywords: Mixture models, duration models, financial transaction data
JEL Classification: C41, C22, C25, C51, G14
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