This paper provides theoretical properties and Monte-Carlo studies of a stochastic conditional duration model with mixture-of-normal error distributions an effcient estimation approach via a continuous empirical characteristic function. The empirical version of this paper is studied in Xu,...

The upward bias of the widely used Thompson-Waller estimator has been pointed out in the literature. In contrast the current paper provides a case the estimator would have downward bias. Such case satisfies the two conditions: (i) the buy (sell) order tends to follow buy (sell) order and (ii)...

One application of cointegration tests is screening candidate stocks for the investment strategy known as statistical arbitrage. This paper develops two robust tests for cointegration by using rank-based and least absolute deviation regression to modify the seminal Engle-Granger test. Critical...

Covariance appears throughout investment management, e.g., in risk reporting and control, portfolio construction, risk parity, smart beta, algorithmic trading, and hedging. It is usually represented via multi-factor model. The form’s fewer parameters and structure—comovement through...

In the estimation of risk measures such as Value at Risk and Expected shortfall relatively short estimation windows are typically used rendering the estimation error a possibly non-negligible component. In this paper we build upon previous results for the Value at Risk and discuss how the...

Extreme Value Theory is increasingly used in the modelling of financial time series. The non-normality of stock returns leads to the search for alternative distributions that allows skewness and leptokurtic behavior. One of the most used distributions is the Pareto Distribution because it allows...

High frequency data is a recent entrant to the world of statistics as they relate to the markets. With tick by tick data we get to see the microstructure of the markets and often are better able to see how they vary from the traditional portrayal. Traditional tools used to look at daily and...