Spurious and hidden volatility

M. Angeles Carnero
Authors registered in the RePEc Author Service: Esther Ruiz () and Daniel Peña

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

Abstract: This paper analyses the effects caused by outliers on the identification and estimation of GARCH models. We show that outliers can lead to detect spurious conditional heteroscedasticity and can also hide genuine ARCH effects. First, we derive the asymptotic biases caused by outliers on the sample autocorrelations of squared observations and their effects on some homoscedasticity tests. Then, we obtain the asymptotic biases of the OLS estimates of ARCH(p) models and analyze their finite sample behavior by means of extensive Monte Carlo experiments. The finite sample results are extended to GLS and ML estimates of ARCH(p) and GARCH(1,1) models.

Date: 2004-07
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: SPURIOUS AND HIDDEN VOLATILITY (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws042007

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