5. Outlier Robust Specification of Multiplicative Time-Varying Volatility Models

5. Outlier Robust Specification of Multiplicative Time-Varying Volatility Models

Amado, C. (2025). Outlier Robust Specification of Multiplicative Time-Varying Volatility Models. Computational Economics, 66(5), 4107–4135. https://doi.org/10.1007/s10614-024-10838-4


This article proposes a robust specification procedure for time-varying multiplicative volatility models that is resilient to the presence of outliers. It addresses a key problem in financial time series, namely the difficulty of distinguishing smooth changes in unconditional variance from isolated extreme observations, which often generate spurious non-stationarity and inflated volatility persistence in standard GARCH models. The study builds on the MTV-GARCH framework, which decomposes volatility into a short-run stochastic GARCH component and a smoothly evolving deterministic component. To reduce the influence of additive outliers, the author introduces bounded M-estimators for the GARCH dynamics and develops a robust Lagrange Multiplier test for detecting variance changes. Monte Carlo simulations show that the proposed procedure substantially improves size and power relative to conventional tests under outlier contamination. Applications to daily commodity returns (corn and sugar) illustrate its practical relevance, revealing cases of false variance shifts under standard methods. The approach offers important implications for risk management and portfolio allocation.

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Avsnitt(108)

20. A Discomforting Pedagogy of Poverty: Discourses, Representations and Vulnerabilities

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Hutton, M., & Heath, T. (2025). A Discomforting Pedagogy of Poverty: Discourses, Representations and Vulnerabilities. Sociology. https://doi.org/10.1177/00380385251380772This article proposes a “pedag...

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19. Exploring the longitudinal impact of entrepreneurial education on entrepreneurial competences and intentions: evidence of an asymmetric polarization effect

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18. Framework for cross-border governance: from cross-border critical factors to sustainable development

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Krüger, C., Pennabel, A. F., Paschoalotto, M. A. C., Guimarães, F. H. C. B., Medeiros Kruger, N. R., Meneguzzo, M., Passador, C. S., & Ferreira Caldana, A. C. (2024). Framework for cross-border govern...

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17. Do earnouts create the right incentives? Earnings management around earnout-based acquisitions

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Coelho, A. P., & Loureiro, G. (2025). Do earnouts create the right incentives? Earnings management around earnout-based acquisitions. Journal of Financial Research. https://doi.org/10.1111/jfir.70007T...

3 Mars 13min

16. 30th birthday celebrations: Views from the top about future management research and practice

16. 30th birthday celebrations: Views from the top about future management research and practice

Ratten, V., Newman, A., Palacios-Marqués, D., Mckeown, T., Casais, B., Prentice, C., Nuñez-Sánchez, J. M., Liñán, F., Stanton, P., Le, H., Aseri, M. A., & Walton, S. (2026). 30th birthday celebrations...

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15. Between promise and practice: a scoping review of the democratic outcomes of youth participation in local governance

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Ramos, F., Tavares, A. F., & da Cruz, N. F. (2026). Between promise and practice: a scoping review of the democratic outcomes of youth participation in local governance. Children and Youth Services Re...

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14. Science and productivity in European firms: how do regional innovation modes matter?

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Barbosa, N., & Faria, A. P. (2026). Science and productivity in European firms: how do regional innovation modes matter? European Planning Studies, 34(1), 84–106. https://doi.org/10.1080/09654313.2025...

17 Feb 5min

13. Balancing the double-edged sword of artificial Intelligence: Job demands, resources, and Work–Life balance

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