A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities

Fei Chen; Francis X. Diebold; Frank Schorfheide

doi:10.3386/w18078

A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities

Fei Chen, Francis X. Diebold & Frank Schorfheide

Working Paper 18078

DOI 10.3386/w18078

Issue Date May 2012

We propose and illustrate a Markov-switching multi-fractal duration (MSMD) model for analysis of inter-trade durations in financial markets. We establish several of its key properties with emphasis on high persistence (indeed long memory). Empirical exploration suggests MSMD's superiority relative to leading competitors.

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. For outstanding research assistance we thank Matthew Klein. For financial support we thank the U.S. National Science Foundation and the Wharton Financial Institutions Center. For helpful comments we thank Emily Fox, Aureo de Paula and Kevin Song, and seminar participants at the University of Pennsylvania. All errors are ours alone.
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A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities

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