EconPapers    
Economics at your fingertips  
 

Outliers and conditional autoregressive heteroscedasticity in time series

Esther Ruiz, Daniel Peña () and M. Angeles Carnero ()

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: This paper reviews the literature on GARCH-type models proposed to represent the dynamic evolution of conditional variances. Effects of level outliers on the diagnostic and estimation of GARCH models are also studied. Both outliers and conditional heteroscedasticity can generate time series with excess kurtosis and autocorrelated squared observations. Consequently, both phenomena can be confused. However, since outliers are generated by unexpected events and the conditional variances are predictable, it is important to identify which one is producing the observed features in the data. We compare two alternative procedures for dealing with the simultaneous presence of outliers and conditional heteroscedasticity in time series. The first one is to clean the series of outliers before fitting a GARCH model. The second is to estimate first the GARCH model and then to clean of outliers by using the residuals adjusted by its conditional variance. It is shown that both approaches may result in different estimated conditional variances.

Date: 2001-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed

Downloads: (external link)
https://e-archivo.uc3m.es/bitstream/handle/10016/151/ws010704.pdf?sequence=1 (application/pdf)

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:cte:wsrepe:ws010704

Access Statistics for this paper

More papers in DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística
Bibliographic data for series maintained by Ana Poveda ().

 
Page updated 2019-10-07
Handle: RePEc:cte:wsrepe:ws010704