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16

First, Garch models stochastic volatility. Thus its use should be limited to estimating the volatility component. The difference in some of the volatility models is the assumption made of the random variance process components. I believe it has been popular because it is an extension of the ARCH family of models and it is relatively easy to setup and ...

6

Your question's title suggests the market prices are mean reverting. I strongly suggest verifying that assumption via one of the usual tests, such as the Augmented Dickey-Fuller test (implemented in the tseries package of R by the adf.test function, and in other R packages, too). If the market is truly mean reverting, a possible strategy is Detrend the ...

2

1.Is it correct, that the coefficients are now different to the coefficients of the arima output? It seems right that the ARMA coefficients are different. Indeed, in the second model, the GARCH component will capture fluctuations that the ARMA component will not have to capture, resulting in different ARMA parameter estimates. 2.This is the acf of ...

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