This paper features a new autoregressive conditional duration (ACD) model which sits within the theoretical framework provided by the recently developed observation-driven time series models by Creal et al. (2013): the generalized autoregressive score (GAS) models. The autoregressive conditional directional duration (ACDD) model itself contains three novelties. First, durations (intra-trade intervals or waiting-times) are signed, based on whether a (positive) ask-driven trade or a (negative) bid-driven trade occurred. These signed trade-durations are known as directional durations. Second, as the resultant directional durations are no longer positive and asymmetrical but are symmetrically distributed, the familiar generalized autoregressive conditional heteroskedasticity (GARCH)-like formulation of the ACD process is proposed for modeling these directional durations. Consequently, the proposed model is called the ACDD model. Third, using the alternative GARCH-like formulation, persistence or long-memory in the durations is easily addressed both via the mean and variance equations: the mean equation uses a semi-parametric fractional autoregressive (SEMIFAR) formulation and the variance equation uses a GARCH formulation. The paper demonstrates the flexibility and convenience of the generalized autoregressive score (GAS) model framework in the context of a particular ACD model specification. The model can be viewed as an alternative extension of the "asymmetric ACD model" of Bauwens and Giot (2003) which captures information related to the evolution of prices as well as the quote-durations.

Item Type:	Refereed Article
Keywords:	ACD model; ACDD model; directional duration; SEMIFAR; GAS models
Research Division:	Commerce, Management, Tourism and Services
Research Group:	Banking, finance and investment
Research Field:	Financial econometrics
Objective Division:	Economic Framework
Objective Group:	Other economic framework
Objective Field:	Other economic framework not elsewhere classified
UTAS Author:	Jeyasreedharan, N (Dr Nagaratnam Jeyasreedharan)
ID Code:	96783
Year Published:	2014
Deposited By:	TSBE
Deposited On:	2014-11-20
Last Modified:	2018-03-15
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