5 votes
Accepted

GARCH on returns or on log-returns?

What is usually used in practice to forecast volatility? I believe it is log-returns. Is it more appropriate, in general, to fit a GARCH on returns or on log-returns to estimate volatility? The ...
Richard Hardy's user avatar
3 votes

GARCH on returns or on log-returns?

I would not use anything but log returns in finance. The reasons logs are used so frequently are summarised here. Commonly used textbooks like Ruey Tsay, Analysis of Financial Time Series always ...
AKdemy's user avatar
  • 8,739
2 votes
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Standardized residual by GARCH model shows bimodal distribution, is it normal?

This is not normal. I bet that you have not specified the distribution of the standardized innovations to be a bimodal one when specifying the GARCH model. If so, your model is misspecified. And even ...
Richard Hardy's user avatar
1 vote
Accepted

GARCH before and after a shock. How to test if volatilities are different?

Logarithmic returns may be dependent (as in GARCH), but they may still be uncorrelated. If that is the case, $\text{Var}(r_1+\dots+r_n)=\text{Var}(r_1)+\dots+\text{Var}(r_n)$. And if empirically that ...
Richard Hardy's user avatar
1 vote
Accepted

Can the white noise in multivariate GARCH have different distributions?

To answer your question briefly, yes, it possible to have different distributions for the elements in the vector $\mathbf{\epsilon}_t$. Now an elaboration: Your model formulation is incomplete. The ...
Richard Hardy's user avatar
1 vote

Uncertainty on volatility prediction using GARCH(1,1)

"Uncertainty of the prediction" is a very vague term. You can check the "accuracy of the prediction" or the "uncertainty of the parameter estimates". I am assuming that ...
phdstudent's user avatar
  • 8,306
1 vote

Value At Risk Modelling for electricity market with negative prices

Suppose you have a series of historical prices $P_t$, indexed by time, and the current price $P_\mathrm{now}$, and we want to see what the price would become if the price now had changed similarly to ...
Dimitri Vulis's user avatar
1 vote

Are ARMA-GARCH-type models suitable for monthly data?

Technically there is no reason to avoid ARMA-GARCH for low-frequency (e.g. monthly) data. When Robert Engle introduced the ARCH model in 1982, his application was on quarterly data of inflation. ...
Richard Hardy's user avatar

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