All Questions
66 questions
2
votes
0
answers
33
views
How Are The Initial Value of Conditional Variance Calculated in rugarch Package?
I am trying to verify the calculations of my zero-mean GARCH(1,1) model using the rugarch library. At first I thought the initial first value of the conditional ...
1
vote
0
answers
14
views
What are the pros and cons of using multivariate Filtered Historical Simulation with univariate GARCH models compared to a GARCH-DCC approach?
I am assessing the market risk of an equity portfolio and have come across an example in the MATLAB documentation that uses a multivariate Filtered Historical Simulation technique:
https://it....
- 363
2
votes
0
answers
48
views
Understanding Volatility Clustering: Conditional or Unconditional Variance?
A stylized fact observed in financial time series is volatility clustering. Volatility clustering is commonly described as the fact that large changes in asset prices are followed by large changes, ...
- 1,465
2
votes
1
answer
138
views
Testing if volatility increases during ECB-Monetary Press Releases
I'm currently writing a thesis where I am trying to disect the ECB monetary press releases and their impact on the European stock market. I am using an event study methodology. Computing Daily Excess ...
- 23
0
votes
1
answer
339
views
ARIMA vs GARCH: Why ARIMA can't be used to model volatility/variance like GARCH?
We can take the variance series and apply ARIMA model on it to have forecasting of volatility.
"ARIMA modelling is not the best in this circumstance because it models the mean rather than the ...
- 25
2
votes
1
answer
48
views
I can't find an adequate conditional model for this time series
I have the European TTF GAS spot Price time series from 31/12/1990 to 31/10/2022:
https://docs.google.com/spreadsheets/d/1Iu84-oFtv3-ybmp72IJ_s1DfcTG_TDu7/edit?usp=sharing&ouid=...
- 363
1
vote
1
answer
158
views
How to model a GARCH(1,1) with covariate?
The purpose of my study is to understand if changes in environment policy or changes in people concerns about climate change affects volatility or if they can help in the prediction of volatility. In ...
- 37
2
votes
1
answer
462
views
How to model volatility spillovers between some financial time series?
I am doing research to study volatility spillover effects between several financial time series $\{x_{1,t}\}, \dots, \{x_{k,t}\}$ (in my case, $k=4$). What would be the best model to study the ...
- 69.5k
1
vote
0
answers
243
views
How to determine whether to model GARCH effects over ARCH effects?
Based on my understanding, we could determine whether or not to include ARCH effects, by checking the residuals of the mean corrected model (EX: ARMA model). I know the difference between GARCH ...
- 899
6
votes
2
answers
3k
views
Why is GARCH offering no predictive value?
I am playing around with GARCH models for the first time (I have a stats background but basically no experience with GARCH), trying to forecast volatility in a financial time series.
I trained a GARCH(...
- 1,571
0
votes
1
answer
108
views
Forecasting volatility from serially uncorrelated (squared) returns
I am trying to estimate future volatility based on historical stock price data, using (G)ARCH models. I have computed the ACF and PACF of returns and squared returns, and none of them show signs of ...
- 3
1
vote
1
answer
376
views
Can the GARCH model predict other things than only volatility?
I was reading that ARIMA models are used to model the mean whereas GARCH models are usually used to model the conditional variance (i.e. volatility). Is it possible that the GARCH model can somehow be ...
0
votes
0
answers
46
views
How to calculate 1-step ahead volatility for IGAARCh(1,1)
I need some pointers to solve this question?
Any help is appreciated.
- 11
1
vote
0
answers
415
views
The Nonlinear Asymmetric GARCH Model
I'm reading about the Nonlinear Asymmetric GARCH (NAGARCH) model. If NAGARCH(1, 1) is given by:
$${\displaystyle ~\sigma _{t}^{2}=~\omega +~\alpha (~\epsilon _{t-1}-~\theta ~\sigma _{t-1})^{2}+~\beta ~...
- 750
1
vote
1
answer
101
views
ARCH: How is Volatility Formulation rewritten as Residuals Formulation
I am trying to understand the concept of ARCH(1) model from this tutorial video.
From 4:15, it's explained that,
the variance of residuals (1) can be formulated as (2).
( = residual at t, =variance of ...
- 289
1
vote
1
answer
946
views
Why are ARCH/GARCH discussed like they predict the time series value itself instead of residuals?
I am fairly new to time-series analysis, I am trying to learn ARCH/GARCH models.
My understanding is that ARCH/GARCH models try to predict the residuals (difference between an observed value from DGP ...
- 289
1
vote
1
answer
210
views
In a GJR model, is there any interpretation attributed to half of the asymmetry parameter?
I'm reading this paper by Abosedra et. al (2006), where they study the volatility of US natural gas prices.
They report the estimation from a AR(1)-GARCH(1,1) model and a AR(1)-GJR-GARCH(1,1) model as ...
- 787
0
votes
1
answer
528
views
Rolling fixed window scheme for GARCH forecasting
I'm working on my bachelors thesis which mainly revolves around this paper: https://www.mdpi.com/2225-1146/4/1/3/htm
Shortly after describing the dataset in 3.1 the authors mention that they use a ...
- 5
1
vote
0
answers
238
views
Modelling the Conditional Variance in a Panel Setting
I am familiar with ARCH-type models to estimate the conditional volatility of some variable of interest in a univariate setting.
I know that there also exists the concept of multivariate ARCH-type ...
- 1,129
0
votes
2
answers
473
views
Should I include AR, MA, or ARMA in my DCC(1,1)GARCH(1,1) approach?
I know an AR, MA or generally speaking an ARMA term is included for the mean. I however can not find how to determine this for my specific application. Is there any information that can be derived ...
2
votes
1
answer
465
views
Out of sample ARCH forecast
I have estimated a conditional mean model for a time series:
$ x_t = x_{t-1} + \epsilon_t$.
Say I have estimated it using periods 1 to 10. I can do an out of sample conditional mean forecast by ...
- 1,129
1
vote
1
answer
1k
views
Expected Value of an ARMA-GARCH Model
An ARMA(p,q) model is given by
$ \qquad \qquad Y_t = c + \sum\limits_{i=1}^{p}\varphi_iY_{t-i}+\sum\limits_{i=1}^{q}\theta_i\varepsilon_{t-i} + \varepsilon$
with $\varepsilon_t \sim N(0,\sigma^2)$.
...
- 13
1
vote
0
answers
304
views
ARCH coefficient in GARCH models
Is anyone knows to interpret ARCH Coefficient in GARCH Models ? I tried to find what is ARCH Coefficient means. Some says it's for detecting Spillover effect, Some says Volatility Clustering or ...
- 21
3
votes
1
answer
386
views
GARCH(1,1) residuals are not homoskedastic
Given the following simulated GARCH(1, 1) process:
...
- 171
2
votes
1
answer
309
views
GARCH forecast of series (in R) seems too high
I am wondering why the mean of my model is so high leading to a high forecast of the time series data. I included a linear regression in the external regressors as there is a clear downward trend.
I ...
- 509
2
votes
1
answer
3k
views
conditional volatility plot in R - GARCH
When I build a GARCH(1,1) with a skewed generalised error dist to model the innovations, with a linear trend using the fGarch library I get the following:
...
- 509
1
vote
1
answer
483
views
add linear trend back into time series prediction (in R)
I have the following GARCH(1,1) model
...
- 509
1
vote
0
answers
65
views
Should I standardize forecasted and actual values for Mincer Zarnowitz test?
I have some out-of-sample forecasted values of variance through some GARCH model, and now I am trying to perform a Mincer-Zarnowitz test for validity of my predictions. I first standardized both ...
- 11
4
votes
0
answers
83
views
How to pick the daily volatility component in Multiplicative Components GARCH modelling?
Recently I've been drawn to the rather interesting Multiplicative Components GARCH model for intraday volatility modelling, a draft paper written on it can be found here: Chanda, Engle, Sokalska, 2005 ...
- 282
2
votes
0
answers
249
views
Negative unconditional variance forecast for EGARCH model in R
I'm trying to model several financial time series and to get some forecast on them.
Considering the log-returns, I fitted an EGARCH(1,1) on the data and got the parameters, as known constraint-free ...
- 53
3
votes
2
answers
789
views
Conditional Volatility of GARCH squared residuals
Motivation
I want to wrap up my own GARCH implementation
to make sure I have understood the underlying model/assumption.
to leverage forecast::auto.arima to ...
- 1,817
2
votes
1
answer
4k
views
Standardized residuals GARCH models
Lets say I have a GARCH(1,1) model,
First, I model the conditional MEAN,
$$Y_t=\delta+\beta Y_{t-1}+\varepsilon_t$$
NextI gather the residuals $\varepsilon_t$ and model the conditional variance,
...
- 319
4
votes
2
answers
6k
views
Fitting a GARCH model and forecast using validation set approach In R
I have seperated the data into training and testing data. Then I fitted this simple garch model for training data as follows,(using rugarch package)
...
- 899
0
votes
0
answers
59
views
Forecasting a DCCGARCH model estimated by the ccgarch package
How can one predict a dcc-garch model in R using parameters estimated from dcc.estimation from the package ccgarch?
MWExample:
...
- 161
0
votes
1
answer
225
views
Mean Equation Specification using rugarch in R
I fitted a GARCH(1,1) to my 4511 return observations using rugarch in R.
Question: Which of these two mean equation specifications does ...
- 43
1
vote
0
answers
87
views
Estimating and forecasting stock and option prices with GARCH models
I am new in the field of time series. I wonder why there is not enough literature about GARCH models used to predict stock or option prices? In other words, is it reasonable to use a general ...
- 11
2
votes
1
answer
591
views
Can ARCH, GARCH, and GARCH derivative models be used outside of finance?
I'm learning about these models and seems like they can only be used in finance, and the reasoning is the assumption that variance is returns squared. Is this correct?
Can ARCH/GARCH be used to model ...
- 351
2
votes
1
answer
282
views
Markov Switching GARCH - Expanding or Rolling window forecasting?
When modelling volatility do people tend to use expanding or sliding windows to predict the performance of MS GARCH models?
- 265
8
votes
2
answers
3k
views
Bootstrap sample with size greater than the original sample
I want to predict future returns over a 20 days horizon using an ARMA-GARCH model fitted to my data.
The goal is to estimate different risk measures like VaR or CVar.
In particular say I use AR(1) ...
- 1,270
1
vote
1
answer
554
views
Reparametrization of the GJR-GARCH(1,1) model (Asymmetric GARCH models)
Xia et al. (2017) state that the power-transformed and threshold GARCH(1,1,1) model is equivalent to the GJR-GARCH(1,1) model (see page 355 of Xia et al. (2017)). It is not clear why the first model ...
- 33
1
vote
1
answer
3k
views
What is the 1-step-ahead forecast from an ARCH(1) model?
Can anybody shortly show and explain how to do an 1-step-forward ARCH(1) forecast?
3
votes
1
answer
1k
views
Expression for the unconditional variance in the EGARCH model
Given the EGARCH specification:
$\log(\sigma_t^2)=\omega + \alpha(|z_{t-1}| + E[|z_{t-1}|]) + \gamma z_{t-1} + \beta \log(\sigma_{t-1}^2)$
Is it possible to find a closed-form solution for the ...
- 155
2
votes
1
answer
81
views
Distributional forecast for $X_{t+1}$ in GARCH(1,1) with residuals student t distributed
Let's say I have time series of $n$ (simulated) data from the GARCH(1,1) process: $$X_{t+1,n} = \sigma_{t+1,n}(...)*Z_{t+1,n}$$ where $Z_{t,n}$ is iid student t-distributed with $v$ degree of freedom.
...
- 21
5
votes
1
answer
2k
views
GARCH estimates differ in rugarch (R) vs. EViews
I modelled a stock's volatility using the "rugarch" package in R and Eviews.
The estimated model is GARCH(1,1).
Data is as below:
...
- 699
2
votes
2
answers
796
views
Why replace Pearson's correlation with DCC GARCH? (non-technical)
How you would try convincing a non-technical audience that applying DCC GARCH for correlation estimation is better than Pearson's correlation?
The task becomes even more challenging since, as seen in ...
- 213
3
votes
2
answers
2k
views
Testing if the volatility of single stocks and/or indices have risen in the past
I'm currently writing my bachelor thesis and the main goal of my paper is to test if the volatility of single stocks and indices have risen in the past. My data consists of all stocks of the SMI and ...
- 164
2
votes
1
answer
1k
views
How to convert daily volatility to monthly?
Suppose I have a forecasted daily volatility for K days.
How can I get the forecasted monthly volatility from the daily ?
- 3,219
4
votes
1
answer
448
views
Volatility forecasting in presence vs. absence of ARCH effects
Suppose I have a time series $x_t$ with no autocorrelation (consider for example log return of stock prices). If $x_t^2$ is autocorrelated, we can model the series with a GARCH model and provide a ...
- 3,219
6
votes
2
answers
7k
views
Estimating the confidence interval for the volatility of a GARCH model
This question is a followup of my previous question
Forecasting with ARIMA and GARCH: does my plan look alright?
I have a times series $r_t$ and I am trying to estimate its volatility with a GARCH ...
- 3,219
2
votes
1
answer
7k
views
Forecasting with ARIMA and GARCH: does my plan look alright?
I have a time series containing the daily close price for a stock and I would like to perform a 10 days forecast of the volatility.
I'm trying to follow this tutorial: https://talksonmarkets.files....
- 3,219