[R] Simultaneous estimation of mean and garch eq'n

Dirk Eddelbuettel edd at debian.org
Fri May 20 01:14:43 CEST 2005

Tobias Muhlhofer <t.muhlhofer <at> lse.ac.uk> writes:
> Is it possible to simultaneously estimate mean and GARCH parameters in R?
> In other words, I would like to estimate the normal regression equation
> Y = b X + u
> and simultaneously do a garch process on the u's to correct the standard 
> errors.
> I was thinking maybe something with systemfit(), but I can't quite come 
> up with it.

It is but you have to write out the loglikelihood (and possibly its gradient)
which you could then maximise with optim() and friends.  Adrian's GARCH(1,1)
is hard-coded with an analytic gradient -- the convenience of having this 
powerful routine pre-made and comes at the price of its lack of flexibility.

Diethelm's fSeries from Rmetrics can estimate Garch models by calling Ox. That
may work for you too.

Hope this helps,  Dirk

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