A Nonparametric Acd Model

CORE Discussion Paper No. 2006/67

23 Pages Posted: 14 Nov 2006

See all articles by Antonio Cosma

Antonio Cosma

Université du Luxembourg

Fausto Galli

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: August 2006

Abstract

We carry out a nonparametric analysis of financial durations. We make use of an existing algorithm to describe nonparametrically the dynamics of the process in terms of its lagged realizations and of a latent variable, its conditional mean. The devices needed to effectively apply the algorithm to our dataset are presented. On simulated data, the nonparametric procedure yields better estimates than the ones delivered by an incorrectly specified parametric method. On a real dataset, the nonparametric analysis can convey information on the nature of the data generating process that may not be captured by the parametric specification. In this view, the nonparametric method proposed can be a valuable preliminary analysis able to suggest the choice of a good parametric specification, or a complement of a parametric estimation.

Keywords: nonparametric, ACD, trade durations, local-linear

JEL Classification: C14, C41, G10

Suggested Citation

Cosma, Antonio and Galli, Fausto, A Nonparametric Acd Model (August 2006). CORE Discussion Paper No. 2006/67, Available at SSRN: https://ssrn.com/abstract=944419 or http://dx.doi.org/10.2139/ssrn.944419

Antonio Cosma (Contact Author)

Université du Luxembourg ( email )

162a, avenue de la Faïencerie
Luxembourg, L-1511
Luxembourg
+352 46 66 44 6763 (Phone)
+352 46 66 44 6835 (Fax)

Fausto Galli

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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