Modeling Heteroscedasticity in the Presence of Outliers in Discrete-Time Stochastic Series

Emmanuel Alphonsus Akpan*, Lasisi K. E. and Ali Adamu
Additional contact information
Emmanuel Alphonsus Akpan*: Department of Mathematical Science, AbubakarTafawaBalewa University, Bauchi, Nigeria
Lasisi K. E.: Department of Mathematical Science, AbubakarTafawaBalewa University, Bauchi, Nigeria
Ali Adamu: Federal College of Education (Tech.), Gombe, Gombe State, Nigeria

Academic Journal of Applied Mathematical Sciences, 2018, vol. 4, issue 7, 61-76

Abstract: The aim of this study is to examine the effects of outliers on the specification and efficiency of heteroscedastic models fitted to the daily closing share price returns series of two outstanding banks in Nigeria from January 3, 2006 to November 24, 2016. The series consists of 2690 observations for each bank. The data were obtained from the Nigerian Stock Exchange. GARCH(2,0) model with respect to student-t error distribution and GARCH(1,1) model under normal error distribution were successfully fitted to the outlier contaminated series of Diamond bank and United bank for Africa accordingly. On the contrary, EGARCH(1,1) model with respect to student-t error distribution adequately captured the changing variance in the outlier adjusted series of the two banks considered. Substantial evidence revealed that the presence of outliers in returns series leads to model misspecification and adjusting for such outliers ensures model efficiency.

Keywords: ARCH effects; Model efficiency; Nigerian banking sector; Volatility. (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.arpgweb.com/pdf-files/ajams4(7)61-76.pdf (application/pdf)
https://www.arpgweb.com/?ic=journal&info=archive&j ... 018&issue=7&volume=4 (text/html)

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:arp:ajoams:2018:p:61-76

Access Statistics for this article

Academic Journal of Applied Mathematical Sciences is currently edited by Dr. Diana Bílková

More articles in Academic Journal of Applied Mathematical Sciences from Academic Research Publishing Group Rahim Yar Khan 64200, Punjab, Pakistan.
Bibliographic data for series maintained by Managing Editor ().