The dynamic mixed hitting-time model for multiple transaction prices and times
Renault,E. van der Heijden,T.G.E. Werker,B.J.M.
Renault,E.
van der Heijden,T.G.E.
Werker,B.J.M.
Abstract
We propose a structural model for durations between events and (a vector of) associated marks, using a multivariate Brownian motion. Successive passage times of one latent Brownian component relative to random boundaries define durations. The other, correlated, Brownian components generate the marks. Our model embeds the class of stochastic conditional (SCD) and autoregressive conditional (ACD) duration models, which impose testable restrictions on the relation between the conditional expectation and conditional volatility of durations. We strongly reject the SCD and ACD specifications for both a very liquid and less liquid NYSE-traded stock, and characterize causality relations between volatilities and durations.
Description
Date
2014-06
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
duration modeling, hitting time, trading intensity, market microstructure, C41 - Duration Analysis ; Optimal Timing Strategies, G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates
Citation
Renault, E, van der Heijden, T G E & Werker, B J M 2014, 'The dynamic mixed hitting-time model for multiple transaction prices and times', Journal of Econometrics, vol. 180, no. 2, pp. 233-250. https://doi.org/10.1016/j.jeconom.2014.01.009