A simple IID test for autoregressive conditional duration models

ABSTRACT

We propose using the rank-based variance ratio test as an easy-to-implement test for testing the independent and identically distributed assumption of autoregressive conditional duration (ACD) models. We apply the proposed test to duration data of five stocks and get the same conclusions as previous studies.

KEYWORDS:

• Rank-based variance ratio test
• IID test
• ACD models
• high-frequency financial data

JEL CLASSIFICATION:

• C41
• C22
• C12

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research is supported by the Fundamental Research Funds for the Central Universities under grant HUST 2013W7005.