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Center for Financial Studies (CFS), Universität Frankfurt a. M. >
CFS Working Paper Series, Universität Frankfurt a. M. >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/57371
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| Title: | | Capturing the zero: A new class of zero-augmented distributions and multiplicative error processes  |
| Authors: | | Hautsch, Nikolaus Malec, Peter Schienle, Melanie |
| Issue Date: | | 2011 |
| Series/Report no.: | | CFS Working Paper 2011/25 |
| Abstract: | | We propose a novel approach to model serially dependent positive-valued variables which realize a non-trivial proportion of zero outcomes. This is a typical phenomenon in financial time series observed at high frequencies, such as cumulated trading volumes. We introduce a flexible point-mass mixture distribution and develop a semiparametric specification test explicitly tailored for such distributions. Moreover, we propose a new type of multiplicative error model (MEM) based on a zero-augmented distribution, which incorporates an autoregressive binary choice component and thus captures the (potentially different) dynamics of both zero occurrences and of strictly positive realizations. Applying the proposed model to high-frequency cumulated trading volumes of both liquid and illiquid NYSE stocks, we show that the model captures the dynamic and distributional properties of the data well and is able to correctly predict future distributions. |
| Subjects: | | High-Frequency Data Point-Mass Mixture Multiplicative Error Model Excess Zeros Semiparametric Specification Test Market Microstructure |
| JEL: | | C22 C25 C14 C16 C51 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CFS Working Paper Series, Universität Frankfurt a. M.
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