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This article is cited in 1 scientific paper (total in 1 paper)
Applied mathematics
On the practical applicability of three CUSUM-methods for structural breaks detection in EGARCH-models
D. A. Borzykha, A. A. Yazykovabc a National Research University Higher School of Economics, 20, Myasnitskaya ul., Moscow, 101000, Russian Federation
b Federal Research Center “Computer Science and Control” Russian Academy of Sciences, 44, bldg. 2, Vavilova ul., Moscow, 119333, Russian Federation
c Moscow Institute of Physics and Technology (State University), 9, Institutsky per., Dolgoprudny, 141701, Russian Federation
Abstract:
There are three well-known CUSUM-methods of structural breaks detection for standard GARCH-models in the literature: (Inclґan, Tiao, 1994), (Kokoszka, Leipus, 1999) and (Lee, Tokutsu, Maekawa, 2004). Despite the fact that these algorithms were initially developed for standard GARCH-models, there are theoretical arguments that CUSUM-methods can be applied to EGARCH-models. What is more, one can find empirical research which uses these methods to detect structural breaks in real-time series volatility. However, we have not found any numeric experiments which would prove the applicability of CUSUM-methods for EGARCH-models so far. We are not aware of any controlled experiments conducted in order to verify the applicability of these methods for EGARCH-models. This article adds to the existing literature in the following way. We first generate volatility series which possess EGARCH-model with known structural breaks. Then we run simulations and show that CUSUM-methods are weak in detecting structural breaks on medium size samples which are close to real ones. We conclude that the applicability of these methods on EGARCH-models is limited. Therefore, we suggest a hybrid algorithm which is able to improve the performance of CUSUM-methods when detecting structural breaks in all EGARCH-models.
Keywords:
EGARCH, volatility, change points, structural breaks, CUSUM.
Received: October 29, 2019 Accepted: February 13, 2020
Citation:
D. A. Borzykh, A. A. Yazykov, “On the practical applicability of three CUSUM-methods for structural breaks detection in EGARCH-models”, Vestnik S.-Petersburg Univ. Ser. 10. Prikl. Mat. Inform. Prots. Upr., 16:1 (2020), 19–30
Linking options:
https://www.mathnet.ru/eng/vspui435 https://www.mathnet.ru/eng/vspui/v16/i1/p19
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Abstract page: | 67 | Full-text PDF : | 27 | References: | 5 | First page: | 2 |
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