# Why do I get very different results estimating GARCH-M model in EViews and R (rugarch)?

I'm dealing with a GARCH-M model that I've estimated using R and EViews. Here are its mean and variance equations.

Mean equation:

$$y_t=\mu + \rho \sigma^2_t + \varepsilon_t$$

Variance equation:

$$\sigma^2_t = \omega + \alpha \varepsilon_{t-1}^2 + \beta \sigma^2_{t-1} + T$$

where T is a dummy variable containing 0 and 1 to indicate structural change.

Here is my EViews result:

eviews result http://s25.postimg.org/m8gc8y6ql/eviews_result.jpg

And my R code is as follows:

#get data
......
xts<-as.xts(re[,-1],order.by=re[,1])
......
T<- as.matrix(xts[,2])

#GARCH specification
garchspec<- ugarchspec(variance.model = list(model = "sGARCH", garchOrder = c(1, 1),
submodel = NULL, external.regressors = T,
variance.targeting = FALSE),
mean.model = list(armaOrder = c(0, 0), include.mean = TRUE,
archm = TRUE, archpow = 1, arfima = FALSE,
external.regressors = NULL, archex = FALSE),
distribution.model = "ged",
start.pars = list(), fixed.pars = list())

#fitting
fit<-ugarchfit(spec=garchspec, data=xts[,1], out.sample = 0,solver="solnp",
solver.control = list(trace=0), fit.control =
list(stationarity = 1, fixed.se = 0, scale = 0, rec.init = 0.7))
show(fit)


It gives these results:

R result http://s25.postimg.org/ai2erkdy5/R_result.jpg

As you can see, the dummy variable (denoted by vxreg1) is totally insignificant using rugarch in R contrary to a 2.58% p-value in the EViews result. Other estimates have some differences with their counterparts, but they are all minor.

I checked the vignette of rugarch package for many times and cannot find any mistakes in the syntax, and R didn't show any error as well. I wonder what the problem is. I really appreciate it if you can solve my problem.

• the 7th parameter is the GED parameter which is shown in the EViews result – Junnan May 12 '14 at 16:39
• OK, but did you notice that one is using z-test and the other one is using the t-test? Maybe its better to ask this question in SO. – Stat May 12 '14 at 16:44
• I noticed that difference, but I don't think it will have much influence on the results. – Junnan May 12 '14 at 16:53