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Estimating GARCH volatility in the presence of outliers

Author

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  • Carnero, M. Angeles
  • Peña, Daniel
  • Ruiz, Esther

Abstract

GARCH volatilities depend on the unconditional variance, which is a non-linear function of the parameters. Consequently, they can have larger biases than estimated parameters. Using robust methods to estimate both parameters and volatilities is shown to outperform Maximum Likelihood procedures.

Suggested Citation

  • Carnero, M. Angeles & Peña, Daniel & Ruiz, Esther, 2012. "Estimating GARCH volatility in the presence of outliers," Economics Letters, Elsevier, vol. 114(1), pages 86-90.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:86-90
    DOI: 10.1016/j.econlet.2011.09.023
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial markets; Heteroscedasticity; QML estimator; Robustness;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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