In this paper the issue of detecting and handling outliers in the GARCH(1,1) model is addressed. Simulation evidence shows that neglecting even a single outlier has a dramatic on parameter estimates. To detect and correct for outliers, we propose an adaptation of the iterative in Chen and Liu...

In this paper we consider forecasting daily exchange rate returns using neutral network models (NNs). Based on simulations, we argue (i) that neglected GARCH does not lead to spuriously successful NNs and (ii) that if there is nonlinearity in the conditional mean, NNs will exploit this for...

Many common statistical models can be specified as linear models with restrictions imposed on the parameters. A large amount of these models impose restrictions which do not allow for the analytical construction of the probability density function (pdf) of the parameters given the restrictions....