I'm trying to forecast a time series of a stock option using ARMA-GARCH modelling in R. First I determine the ARMA order using AIC and I found (0,1) to be the best one.
But when I run
garchFit(formula=~arma(0,1)+garch(1,1),data=XX,trace=FALSE,include.mean=TRUE)
I get constant mean forecasts.
Whereas when I use ARMA(1,1):
garchFit(formula=~arma(1,1)+garch(1,1),data=brentlog1,trace=FALSE,include.mean=TRUE)
I get variables mean forecasts. Does anyone know why is that?
How do I forecast the actual prices of the stock (not its variance)?