Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/205294 
Year of Publication: 
2019
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2019-004/III
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
In finance, durations between successive transactions are usually modelled by the autoregressive conditional duration model based on a continuous distribution omitting frequent zero values. Zero durations can be caused by either split transactions or independent transactions. We propose a discrete model allowing for excessive zero values based on the zero-inflated negative binomial distribution with score dynamics. We establish the invertibility of the score filter. Additionally, we derive sufficient conditions for the consistency and asymptotic normality of the maximum likelihood of the model parameters. In an empirical study of DJIA stocks, we find that split transactions cause on average 63% of zero values. Furthermore, the loss of decimal places in the proposed model is less severe than in correct treatment of zero values in continuous models.
Subjects: 
Financial High-Frequency Data
Autoregressive Conditional Duration Model
Zero-Inflated Negative Binomial Distribution
Generalized Autoregressive Score Model
JEL: 
C22
C41
C58
Document Type: 
Working Paper

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