Munich Personal RePEc Archive

Ordinal-response models for irregularly spaced transactions: A forecasting exercise

Dimitrakopoulos, Stefanos and Tsionas, Mike G. and Aknouche, Abdelhakim (2020): Ordinal-response models for irregularly spaced transactions: A forecasting exercise.

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Abstract

We propose a new model for transaction data that accounts jointly for the time duration between transactions and for the discreteness of the intraday stock price changes. Duration is assumed to follow a stochastic conditional duration model, while price discreteness is captured by an autoregressive moving average ordinal-response model with stochastic volatility and time-varying parameters. The proposed model also allows for endogeneity of the trade durations as well as for leverage and in-mean effects. In a purely Bayesian framework we conduct a forecasting exercise using multiple high-frequency transaction data sets and show that the proposed model produces better point and density forecasts than competing models.

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