American Journal of Applied Sciences

Specification of Dynamic Time Series Model with Volatile-Outlier Input Series

T. A. Lasisi, D.K. Shangodoyin, O. O. Sangodoyin, W.M. Thupeng and P.M. Kgosi

DOI : 10.3844/ajassp.2011.1149.1153

American Journal of Applied Sciences

Volume 8, Issue 11

Pages 1149-1153

Abstract

Problem statement: This study considers the precision of the output series generated from aberrant input series in the context of the distribution of the dynamic estimate and also investigate relative merit of analyzing residuals with outliers for a volatility input dynamic model. Approach: The study developed a methodology for checking volatility at every time point and evaluates the influence of volatility and outliers on both the estimates of the fitted Dynamic Model (DM) and test criterion for model adequacy. Results: Both the analytical and empirical findings in this study reveal that outliers affect significantly the estimates of the dynamic model and there was a masking effect of volatility with outliers in the series and therefore jeopardizes test criterion for model adequacy because outlier series were embedded in its computation. Conclusion: The analysis of outlier in dynamic model specification can involve the determination of volatility, most especially in economic series for which causal relationship can proffer some evidence based solutions to decision makers on pressing economic issues. The model specified in this study has shown the influence of outlier embedded with volatility in empirical study on dynamic function modelling. In the first instance, outlier significantly affects the estimates of the model, apart from this; the model residual is affected, these have a combine effect on the precision of output generated.

Copyright

© 2011 T. A. Lasisi, D.K. Shangodoyin, O. O. Sangodoyin, W.M. Thupeng and P.M. Kgosi. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.