Advanced Search
MyIDEAS: Login to save this paper or follow this series

Outlier Detection in GARCH Models

Contents:

Author Info

Abstract

We present a new procedure for detecting multiple additive outliers in GARCH(1,1) models at unknown dates. The outlier candidates are the observations with the largest standardized residual. First, a likelihood-ratio based test determines the presence and timing of an outlier. Next, a second test determines the type of additive outlier (volatility or level). The tests are shown to be similar with respect to the GARCH parameters. Their null distribution can be easily approximated from an extreme value distribution, so that computation of p-values does not require simulation. The procedure outperforms alternative methods, especially when it comes to determining the date of the outlier. We apply the method to returns of the Dow Jones index, using monthly, weekly, and daily data. The procedure is extended and applied to GARCH models with Student-t distributed errors.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nuffield.ox.ac.uk/economics/papers/2005/w24/GarchOutlier.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2005-W24.

as in new window
Length: 27 pages
Date of creation: 20 Sep 2005
Date of revision:
Handle: RePEc:nuf:econwp:0524

Contact details of provider:
Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Shinichi Sakata & Halbert White, 1998. "High Breakdown Point Conditional Dispersion Estimation with Application to S&P 500 Daily Returns Volatility," Econometrica, Econometric Society, Econometric Society, vol. 66(3), pages 529-568, May.
  2. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Neil Shephard, 2005. "Stochastic Volatility," Economics Papers, Economics Group, Nuffield College, University of Oxford 2005-W17, Economics Group, Nuffield College, University of Oxford.
  4. Jurgen Doornik & Marius Ooms, 2003. "Multimodality in the GARCH Regression Model," Economics Series Working Papers, University of Oxford, Department of Economics 2003-W20, University of Oxford, Department of Economics.
  5. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
  6. Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, Elsevier, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Aurea Grané & Helena Veiga, 2010. "Outliers in Garch models and the estimation of risk measures," Statistics and Econometrics Working Papers, Universidad Carlos III, Departamento de Estadística y Econometría ws100502, Universidad Carlos III, Departamento de Estadística y Econometría.
  2. Grané, Aurea & Veiga, Helena, 2010. "Wavelet-based detection of outliers in financial time series," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 54(11), pages 2580-2593, November.
  3. Amélie Charles & Olivier Darné, 2012. "Volatility Persistence in Crude Oil Markets," Working Papers, HAL hal-00719387, HAL.
  4. Maurício Yoshinori Une & Marcelo Savino Portugal, 2005. "Can fear beat hope? A story of GARCH-in-Mean-Level effects for Emerging Market Country Risks," Econometrics, EconWPA 0509006, EconWPA.
  5. Jurgen Doornik & Marius Ooms, 2003. "Multimodality in the GARCH Regression Model," Economics Series Working Papers, University of Oxford, Department of Economics 2003-W20, University of Oxford, Department of Economics.
  6. Koenig, P., 2011. "Modelling Correlation in Carbon and Energy Markets," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1123, Faculty of Economics, University of Cambridge.
  7. Charles, Amélie & Darné, Olivier, 2014. "Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013," Journal of Banking & Finance, Elsevier, Elsevier, vol. 43(C), pages 188-199.
  8. M. Angeles Carnero & Daniel Peña & Esther Ruiz, 2008. "Estimating and Forecasting GARCH Volatility in the Presence of Outiers," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2008-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Kocenda, Evzen & Valachy, Juraj, 2006. "Exchange rate volatility and regime change: A Visegrad comparison," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 727-753, December.
  10. Beum-Jo Park, 2009. "Risk-return relationship in equity markets: using a robust GMM estimator for GARCH-M models," Quantitative Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(1), pages 93-104.
  11. E. Ruiz & M.A. Carnero & D. Pereira, 2004. "Effects of Level Outliers on the Identification and Estimation of GARCH Models," Econometric Society 2004 Australasian Meetings, Econometric Society 21, Econometric Society.
  12. Doornik, Jurgen A. & Ooms, Marius, 2008. "Multimodality in GARCH regression models," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(3), pages 432-448.
  13. Aurea Grané & Helena Veiga, 2009. "Wavelet-based detection of outliers in volatility models," Statistics and Econometrics Working Papers, Universidad Carlos III, Departamento de Estadística y Econometría ws090403, Universidad Carlos III, Departamento de Estadística y Econometría.
  14. Fagiani, Riccardo & Hakvoort, Rudi, 2014. "The role of regulatory uncertainty in certificate markets: A case study of the Swedish/Norwegian market," Energy Policy, Elsevier, Elsevier, vol. 65(C), pages 608-618.
  15. Alberto Mora-Galan & Ana Perez & Esther Ruiz, 2004. "Stochastic Volatility Models And The Taylor Effect," Statistics and Econometrics Working Papers, Universidad Carlos III, Departamento de Estadística y Econometría ws046315, Universidad Carlos III, Departamento de Estadística y Econometría.
  16. Amélie Charles, 2008. "Forecasting volatility with outliers in GARCH models," Journal of Forecasting, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 27(7), pages 551-565.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nuf:econwp:0524. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.