Plenary Lecture

Detection of Level Change (LC) Outlier in Garch(1,1) Processes

Associate Professor Azami Zaharim
Coordinator Fundamental Engineering Studies
Faculty of Engineering and Built Environment
Universiti Kebangsaan Malaysia
43600 UKM, Bangi, Selangor
MALAYSIA
Email: azami@vlsi.eng.ukm.my

Abstract: An outlier is an ‘extreme’ observation that may have a severe effect on data analysis. Their occurrences might cause problems such as bias or distortion of parameter estimation. When a time series with outliers is modelled and forecasted without taking into account their presence or without removing their effects, the test statistics of estimated parameters in the model will be distorted. A GARCH (1,1) process is not exceptional from being affected by outliers. In this study we construct test statistics for identifying outliers in GARCH (1,1) processes with special focus on the temporary change (LC) type. The statistic was developed by the least squares method, and consequently a simulation was carried out for the purpose of finding the critical region. This study is an extension of Chen and Liu’s (1993) work on outlier detection. . The simulation was done for eight sample sizes; 50, 100, 150, 200, 250, 500, 1000 and 2000. The 90th, 95th and 99th percentiles were computed for estimating the distribution of the test statistic. The critical value was selected based on the simulation study and was used in detecting the presence of level change (LC) in the return series of Industrial Product Index (IPI). For the period of analysis, the results indicate that LC outlier occurred in 1998.

Brief Biography of the Speaker:
Azami Zaharim worked first 13 years as a lecturer in the Universiti Teknologi MARA (University of MARA Technology - UiTM) before joining the Universiti Kebangsaan Malaysia (National University of Malaysia - UKM) in the year 2003. He is Associate Professor at the Faculty of Engineering and Built Environment UKM, and is currently Coordinator for the Unit Fundamental Engineering Studies. He obtained his BSc(Statistics and Computing) with Honours from North London University, UK in 1988 and PhD (Statistics) in 1996 from University of Newcastle Upon Tyne, UK. He specialize in statistics, public opinion, engineering education and renewable energy resources.
He has until now published over 80 research papers in Journals and conferences, conducted more than 15 public opinion consultancies and delivered 3 keynotes/invited speeches at national and international meetings. He is currently the head of Renewable Energy Resources and Social Impact Research Group under the Solar Energy Research Institute (SERI). In the year 2007, he headed the Engineering Mathematics Research Group. At the same time, he is currently active involve in outcome based education (OBE) approach at the national level and the chairman of the Engineering Education Research Group since 2005. He is also involved actively in the research for the future of engineering education in Malaysia 2006 under the Ministry of Higher Education of Malaysia.