# Questions tagged [garch]

Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model is used for time series in which the conditional variance is time-varying and autocorrelated. The conditional variance is a linear combination of lagged conditional variances and lagged squared errors. The conditional variance equation in GARCH models is deterministic, in contrast to Stochastic Volatility (SV) models.

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### Time series analysis for stock prices

I am using GARCH model to simulate price of an index for 7 years. For input I am using difference of Log of prices (log of return). GARCH(1,1) has the lowest AIC, and I found parameters for the ...
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### Predicting stock returns with GARCH in Python

I have seen this post: Correctly applying GARCH in Python which shows how to correctly apply GARCH models in Python using the arch library. Now I am wondering how I ...
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### Volatility clustering and Behavioral Finance, possible explanation

Currently studying about time series modelling of financial data and faced the known GARCH$(p,q)$ model for modelling volatility. We observe that big changes are followed by large changes and vice ...
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### GARCH fit: “failure to achieve convergence”… a problem?

Sometimes when one is trying to fit a GARCH model may happen that in the estimation summary (whatever software is) there is written "failure to achieve convergence after n iteration" or similar things....
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### Negative signs in GARCH equation

When one try to fit a GARCH on a time series it may happen that one or more coefficients in the estimation output have negative sign. In these cases: all the negative coefficients (and relative ...
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### Double sign for the error term in an ARMA-GARCH model

Why in an ARMA-GARCH model for a stationary series $r$ (without $c$ for simplicity) is $r_{forecast} = ARMA + \sqrt{GARCH} \cdot inn$ and not $r_{forecast} = ARMA \pm \sqrt{GARCH} \cdot inn$? The ...
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### What's the correct graphical comparison in a GARCH fit?

Suppose that the stationary series $r_t$ is well fitted by an $ARMA(p,q)+c$ and $GARCH(r,s)$ model, where $GARCH(r,s) = \sigma_t ^2$ If in the testing sample I have to graphically compare the ...
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### Error distribution assumption in a simple ARIMA model

why in an ARIMA-GARCH structure I have to assume an error distribution to run the estimation while in a simple ARIMA model it is not required? Thank you
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### Finding the distribution and moments of returns with GARCH models (in R if possible)

I understand the GARCH type models and I know how to fit a model to a time series. But, there is a paper which calculates the moments of the distribution of returns (Variance, Skewness, and Kurtosis) ...
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### Can GARCH volatility simulations generally be applied to return-modelling models?

This may be a naive question, but I still hope some discussion can elucidate a (so far) totally nebulous point for me. I've recently learned that GARCH models can give one simulations of ...
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### EWMA Volatility vs Volatility of EWMA

Is taking the standard deviation of a EWMA smoothed series equivalent to getting the EWMA volatility for that series?
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### ARCH Model: Which part does AR refer to?

My background is signal processing and I am fairly new to (financial) time series analysis. I was reading the article about autoregressive conditional heteroskedasticity (ARCH) models on Wikipedia. ...
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### Drop weekend data Vs fill weekend data for GARCH-type modelling

I have a dilemma for an analysis I'm currently on. I doing some GARCH modelling of bitcoin and a fiat currency. There are some null values with the fiat datasets in comparison with bitcoin data as ...
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### ARMA/GARCH forecasting prices?

i am dealing with brent crude oil price data and i am trying to forecast prices via ARMA/GARCH. I first convert prices into returns (return=diff(ln(P(t)-lnP(t-1))*100) and i obtained a stationnary ...
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### Hedging with variance swaps: how to calculate the notional

Returns on an asset are negatively correlated with own variance, and I would like to set up a hedge with a variance swap (no options are traded). I need to decide on the notional of the swap: any ...
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### Asset class dynamics differences

If we compare daily return dynamics of the main asset class time series (e.g. Stock indexes, bonds, precious commodities, etc) do we observe quantifiable differences? Are there some reference paper on ...
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### ARIMA vs ARIMA + GARCH [closed]

If an ARIMA model converges quickly, would using GARCH improve the forecast performance? By improve I mean provide longer time periods for forecasts. Basically trying to forecast returns.
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### Accuracy for GARCH models

How does one calculate the accuracy of forecasts given by GARCH models considering GARCH is run on returns. Assuming GARCH is a derivative of a regression based prediction model, would regular ...
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### GARCH modeling - sliding or expanding window?

In practice, when modeling volatility do people tend to use expanding or sliding windows to fit GARCH models? For example see rolling forecast generation vs recursive forecast generation in the ...
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### Explanation and Application of Quantile Regression of Value-At-Risk

Self-learner here. Please, excuse me if I am asking a Question already answered, but the explanations that I find online, just seem to be a bit hard for me. I am currently trying to apply the Basel ...
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### Criticise GARCH relative to Realized Volatility

I would like to have your opinion about a simple question. While GARCH would be useful to calculate the conditional volatility, and the RV being in some sense the "historical" volatility, what would ...
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### VAR-aDCC full ARCH and GARCH parameter matrices in R

I am working with the rmgarch package in R and I estimated a VAR-aDCC model. Is there any way to extract the extended version of estimates (allowing for volatility ...
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### GARCH mean and volatility spillover R commands needed

I analyzed an MA(1)-GARCH(1,1) model in R, and now I want to test the conditional mean and volatility spillover effect between the two time series (exchange rates) (based on Hamao et al., 1990). ...
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### What are the current gold standards for volatility prediction error?

I'm working on volatility forecasting models for equities and currencies. I am using daily data and am interested in producing forecasts for the next n days. To ...
As we all know, the GARCH model is stated as $\epsilon_t = \sigma_tz_t$ $\sigma_t^2 = w + \sum^q_{i=1}\alpha_i\epsilon_{t-i}^2 + \sum^q_{i=1}\beta_i\sigma_{t-i}^2$ In application, the estimate \$\hat{\...