Distribution Choice for the Asymmetric ACD Models

Abstract

In the paper, I generalize the Asymmetric Autoregressive Conditional Duration (AACD) model proposed by Bauwens and Giot (2003) with respect to the generalized gamma and the Burr distribution for an error term. I derive the log likelihood functions for the augmented models and show how to check the goodness-of-fit of the distributional assumptions with the application of the probability integral transforms proposed by Diebold, Gunther and Tay (1998). Moreover, I present an exemplary empirical application of the Asymmetric ACD model for the durations between submissions of market or best limit orders on the interbank trading platform for the Polish zloty. I test the impact of selected market microstructure factors (i.e. the bid-ask spread, volatility) on the time of order submissions.