Any duration model experts out there?
I'm trying to get started with implementing Liu and Hong's omnibus
specification test for duration models with censoring -- see
http://ajbuckeconbikesail.net/Seminars/Spring_08/Duration_Chapter1.pdf
-- but I've got stuck on what seems like it should be an elementary
point.
The relevant pages of the article are 6-10. Here's my problem: their
empirical survivor function (p. 10) involves counting cases where
V_i(\theta) and C_i(\theta), for observations i, are greater than
duration value t. But V_i and C_i are (if I'm reading the paper
right) CDF values and therefore limited to [0,1], while the duration t
is said on page 6 to be distributed on [0, \infty). So I don't see how
these two terms can be meaningfully compared.
I guess I'm missing some implicit mapping/transformation (maybe of t
onto [0,1]?). Can anyone help?
Allin