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Detecting level shifts in ARMA-GARCH (1,1) Models

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  • F. Javier Trivez
  • Beatriz Catalan
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    Abstract

    The purpose of this article is to present a new method to detect level shifts in the context of conditional heteroscedastic models. First, we define precisely what type of outlier we are referring to, a concept that has been scarcely touched in the field of GARCH (1,1) models, and then we go on to present our methodology based on the nature of the Lagrange multiplier tests. The validity and efficiency of the proposed procedure are demonstrated through different simulation experiments. To conclude, we present a practical application of the method to the time series of returns of US short-term interest rates.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/02664760802499303
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Applied Statistics.

    Volume (Year): 36 (2009)
    Issue (Month): 6 ()
    Pages: 679-697

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    Handle: RePEc:taf:japsta:v:36:y:2009:i:6:p:679-697

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    Related research

    Keywords: level outliers; volatility outliers; level shifts; GARCH models; LM tests;

    References

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