Statistical Modelling 10 (2010), 379390
Bayesian outlier detection in Capital Asset Pricing Model
Maria Elena De Giuli
Department of Economics and Quantitative Methods,
University of Pavia
Italy
Mario Alessandro Maggi
Department of Economics and Quantitative Methods,
University of Pavia
Italy
Claudia Tarantola
Department of Economics and Quantitative Methods,
Via S. Felice 7,
I27100 Pavia
Italy
eMail: claudia.tarantola@unipv.it
Abstract:
We propose a novel Bayesian optimization procedure for outlier detection in
the Capital Asset Pricing Model. We use a parametric product partition model
to robustly estimate the systematic risk of an asset. We assume that the
returns follow independent normal distributions and we impose a partition
structure on the parameters of interest. The partition structure imposed on
the parameters induces a corresponding clustering of the returns. We identify
via an optimization procedure the partition that best separates standard
observations from the atypical ones. The methodology is illustrated with
reference to a real dataset, for which we also provide a microeconomic
interpretation of the detected outliers.
Keywords:
Capital Asset Pricing Model; constrained optimization algorithm;
Markov chain Monte Carlo; outlier identification;
parametric product partition models; score function
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