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Bayesian Analysis of the Stochastic Conditional Duration Model

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  • Chris M. Strickland
  • Catherine S. Forbes
  • Gael M. Martin

Abstract

A Bayesian Markov Chain Monte Carlo methodology is developed for estimating the stochastic conditional duration model. The conditional mean of durations between trades is modelled as a latent stochastic process, with the conditional distribution of durations having positive support. The sampling scheme employed is a hybrid of the Gibbs and Metropolis Hastings algorithms, with the latent vector sampled in blocks. The suggested approach is shown to be preferable to the quasi-maximum likelihood approach, and its mixing speed faster than that of an alternative single-move algorithm. The methodology is illustrated with an application to Australian intraday stock market data.

Suggested Citation

  • Chris M. Strickland & Catherine S. Forbes & Gael M. Martin, 2003. "Bayesian Analysis of the Stochastic Conditional Duration Model," Monash Econometrics and Business Statistics Working Papers 14/03, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2003-14
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2003/wp14-03.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Transaction data; Latent factor model; Non-Gaussian state space model; Kalman filter and simulation smoother.;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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