Malaysian Tapis: A Closer Look into Additive Outliers and Persistence Volatility

• Published in: Journal of Physics: Conference Series
• Main Author: Mohd Nasir I.N.; Ismail M.T.; Abdul Karim S.A.
• Format: Conference paper
• Language: English
• Published: Institute of Physics Publishing 2018
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85058225018&doi=10.1088%2f1742-6596%2f1123%2f1%2f012041&partnerID=40&md5=31734664ceb225986bfa26aef5892589

As Malaysia is one of the countries, which relies on oil-related revenues for its economic planning, the modelling volatility in crude oil price may therefore have some implications for its policies which the present study intends to look into. Specifically, the main objective of the present study is to examine the impact of outliers, which are identified based on the method proposed by Doornik and Ooms (2005) on the volatility persistence of Malaysian Tapis. The outliers of Tapis have reportedly been associated with unexpected events such as wars, financial crises, etc. The salient findings of the present study revealed that: 1) Tapis may have relatively higher degree of volatility persistence 2) Outliers may potentially bias the estimation of GARCH (1,1) model and 3) Outliers may correct Student-t-based specifications and outperform the other models in capturing the volatility. It was on such findings; it can be recommended that outliers should be considered in improving the volatility modelling in Tapis oil markets. © Published under licence by IOP Publishing Ltd.