Assessment of Local Influence in GARCH Processes

Xibin Zhang (xibin.zhang@monash.edu)

Journal of Time Series Analysis, 2004, vol. 25, issue 2, 301-313

Abstract: Abstract. This paper investigates the problem of assessing local influence of small perturbations in GARCH processes. First, we examine the local influence on the Lagrange multiplier (LM) statistic. Second, we assess the local influence on the pseudo‐likelihood of the GARCH model. We find that short patches of high volatility observations that have a strong influence on the LM statistic may not necessarily be influential on the pseudo‐likelihood. This is mainly due to the fact that the effects of high volatility could be incorporated through GARCH modeling. An empirical example is presented to illustrate the effectiveness of the proposed methods. It is interesting to note that observations which have a very strong influence on the LM statistic are far less influential on the GARCH pseudo‐likelihood, suggesting that under the GARCH model they should not be regarded as outliers.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1046/j.0143-9782.2003.00351.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jtsera:v:25:y:2004:i:2:p:301-313

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-9782

Access Statistics for this article

Journal of Time Series Analysis is currently edited by M.B. Priestley

More articles in Journal of Time Series Analysis from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery (contentdelivery@wiley.com).