The Markov Switching ACD Model

Regime-switching Pareto distributions for ACD models

Econometric literature on financial durations has been popularized by the introduction of the Autoregressive Conditional Duration model. In the latest years, a lot of refinements have been suggested. Following financial market microstructure arguments, it is argued that a Pareto distribution is a meaningful representation for durations. The model is analyzed under the hypothesis of regime-switc...

Lecture on the Markov Switching Model

Simultaneous Equations in the Markov-Switching Model

In this paper, Hamilton’s (1989) Markov-switching model is extended to the simultaneous equations model. Using a framework for an instrumental variable interpretation of full information maximum likelihood (FIML) by Hausman (1975), we can deal with the problem of simultaneous equations based on the Hamilton filter. When we compared the proposed FIML Markov-switching model to LIML Markovswitchin...

The Impact of Financial Market Fluctuations on Financial Instability in the Iranian Economy: The Wavelet based Markov Switching Model

In this study, the effect of fluctuations of asset markets (exchange rate, oil price and stock market index) on financial instability index over a period of 1388-1397 monthly is investigated by using the Markov Switching model. The wavelet transform model is used to extract exchange rate fluctuations, oil prices and stock market index. The results show that the effect of exchange rate fluctuati...

A Nonparametric ACD Model

We carry out a nonparametric analysis of financial durations. We make use of an existing algorithm to describe nonparametrically the dynamics of the process in terms of its lagged realizations and of a latent variable, its conditional mean. The devices needed to effectively apply the algorithm to our dataset are presented. On simulated data, the nonparametric procedure yields better estimates t...