I'm building an GARCH model using function
garchFit from "fGarch" package in R. When specifying the mean equation I have some difficulties understanding what's happening.
If I specify the mean equation be an ARMA(1,1) process, there are no significant coefficients.
If I specify an ARMA(2,1) model, the
ar1 coefficient suddenly is significant.
However, if I then attempt to "validate" this by merely specifying an AR(1) model as the mean equation, the coefficient is not significant again...
Adding further coefficients and building an ARMA(5,5) model gives me a lot more significant coefficients, but none of them are validated when removing the insignificant terms from the system...
In a typical reduced form regression, this would confuse me a lot and I now do not quite know how to proceed.