The effects of additive outliers and measurement errors when testing for structural breaks in variance

Paulo M. M. Rodrigues, Antonio Rubia

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

This article discusses the asymptotic and finite-sample properties of the CUSUM tests for detecting structural breaks in volatility when the data are perturbed with (additive) outliers and/or measurement errors. The special focus is on the parametric and non-parametric tests in Inclan and Tiao (1994) and Kokoszka and Leipus (2000). Whereas the asymptotic distribution of the former can be largely affected, the distribution of the latter remains invariant and renders consistent break-point estimates. In small samples, however, large additive outliers are able to generate sizeable distortions in both tests, which explains some of the contradictory findings in previous literature.

Original languageEnglish
Pages (from-to)449-468
Number of pages20
JournalOxford Bulletin of Economics and Statistics
Volume73
Issue number4
DOIs
Publication statusPublished - Aug 2011

Keywords

  • VOLATILITY
  • SQUARES
  • MODELS
  • CUSUM
  • ARCH

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