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Least Trimmed Squares: Cointegration and Outliers

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Listed:
  • Vanessa Berenguer‐Rico
  • Bent Nielsen

Abstract

When applying the cointegrated autoregressive distributed lag model it is common to include indicator variables for outliers. This is often done in a somewhat ad hoc way. Least Trimmed Squares estimation provides a more systematic approach. This estimator is robust to a large number of outliers of many types. We analyse the estimator in a model that allows a range of contamination and show that it has the same asymptotic properties as the infeasible Ordinary Least Squares estimator applied to a model generated by the good errors.

Suggested Citation

  • Vanessa Berenguer‐Rico & Bent Nielsen, 2026. "Least Trimmed Squares: Cointegration and Outliers," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 88(4), pages 690-711, August.
    • Handle: RePEc:bla:obuest:v:88:y:2026:i:4:p:690-711
    DOI: 10.1111/obes.70077
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