Effects of Level Outliers on the Identification and Estimation of GARCH Models
In this paper, we study the effects caused by the presence of outliers on the identification and estimation of GARCH models. First, we derive the asymptotic biases of the sample autocorrelations of squared observations and their effects on some popular homoscedasticity tests when uncorrelated GARCH series are contaminated by level outliers. Then, we obtain the asymptotic biases of the OLS estimates of the parameters of ARCH(p) models and analyze their finite sample behavior by means of extensive Monte Carlo experiments. The finite sample results are also extended to ML estimates of ARCH(p) and GARCH(1,1) models. The results are illustrated analyzing real series of financial ret
|Date of creation:||11 Aug 2004|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Shinichi Sakata & Halbert White, 1998. "High Breakdown Point Conditional Dispersion Estimation with Application to S&P 500 Daily Returns Volatility," Econometrica, Econometric Society, vol. 66(3), pages 529-568, May.
- Lee, Sang-Won & Hansen, Bruce E., 1994. "Asymptotic Theory for the Garch(1,1) Quasi-Maximum Likelihood Estimator," Econometric Theory, Cambridge University Press, vol. 10(01), pages 29-52, March.
- Lee, John H. H., 1991. "A Lagrange multiplier test for GARCH models," Economics Letters, Elsevier, vol. 37(3), pages 265-271, November.
- van Dijk, Dick & Franses, Philip Hans & Lucas, Andre, 1999.
"Testing for ARCH in the Presence of Additive Outliers,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 14(5), pages 539-562, Sept.-Oct.
- van Dijk, D.J.C. & Franses, Ph.H.B.F. & Lucas, A., 1996. "Testing for ARCH in the Presence of Additive Outliers," Econometric Institute Research Papers EI 9659-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Balke, Nathan S & Fomby, Thomas B, 1994.
"Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Time Series,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 9(2), pages 181-200, April-Jun.
- Balke, Nathan S. & Fomby, Thomas B., 1991. "Large shocks, small shocks, and economic fluctuations: outliers in macroeconomic times series," Working Papers 9101, Federal Reserve Bank of Dallas.
- 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 542-547, August.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier.
- Franses, Philip Hans & Ghijsels, Hendrik, 1999. "Additive outliers, GARCH and forecasting volatility," International Journal of Forecasting, Elsevier, vol. 15(1), pages 1-9, February.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Lumsdaine, Robin L. & Ng, Serena, 1999.
"Testing for ARCH in the presence of a possibly misspecified conditional mean,"
Journal of Econometrics,
Elsevier, vol. 93(2), pages 257-279, December.
- Robin L. Lumsdaine & Serena Ng, 1998. "Testing for ARCH in the Presence of a Possibly Misspecified Conditional Mean," Boston College Working Papers in Economics 370, Boston College Department of Economics.
- Jurgen A. Doornik & Marius Ooms, 2005.
"Outlier Detection in GARCH Models,"
2005-W24, Economics Group, Nuffield College, University of Oxford.
- Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
When requesting a correction, please mention this item's handle: RePEc:ecm:ausm04:21. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.