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

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.

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Paper Number
12-020
Year
2012