[R-SIG-Finance] Problem with garch (tseries)

[michael mathews]

Hi Folks,
I would like to thank everyone for their input. As seems too often to
be the case the part of the analysis I think will be simple is not.
thanks again
michael 

--- Hannu Kahra <hkahra at gmail.com> wrote:

> Michael,
> 
> it may well be the case that specifying the conditional variance as a
> Smooth
> Transition GARCH (STGARCH) model can provide a good description for
> the
> conditional variance. Have a look at the paper by Lundbergh and
> Teräsvirta:
> http://swopec.hhs.se/hastef/abs/hastef0291.htm
> 
> Regards,
> Hannu
> 
> On 8/17/06, michael mathews <muckjail at yahoo.com> wrote:
> >
> > Hi folks,
> > I have been playing with garch models to model the volatility in
> > physical natural prices.
> > Here is the issue I have a dataset of 801 daily returns (attached).
> > If I run
> >
> > garchall<-garch(hsc)
> >
> > ***** ESTIMATION WITH ANALYTICAL GRADIENT *****
> >
> >
> > > summary(garchall)
> >
> > Call:
> > garch(x = hsc)
> >
> > Model:
> > GARCH(1,1)
> >
> > Residuals:
> >     Min      1Q  Median      3Q     Max
> > -4.3424 -0.5734  0.0000  0.6037  4.0501
> >
> > Coefficient(s):
> >     Estimate  Std. Error  t value Pr(>|t|)
> > a0 2.507e-05   9.200e-06    2.726  0.00642 **
> > a1 1.218e-01   2.085e-02    5.840 5.21e-09 ***
> > b1 8.759e-01   1.937e-02   45.212  < 2e-16 ***
> > ---
> > Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
> >
> > Diagnostic Tests:
> >         Jarque Bera Test
> >
> > data:  Residuals
> > X-squared = 62.7291, df = 2, p-value = 2.387e-14
> >
> >
> >         Box-Ljung test
> >
> > data:  Squared.Residuals
> > X-squared = 0.0384, df = 1, p-value = 0.8447
> >
> > Now if we run the same model on a subset say the last 351 days we
> get
> > > garch351<-garch(tail(hsc,351))
> >
> > ***** ESTIMATION WITH ANALYTICAL GRADIENT *****
> >
> >
> > > summary(garch351)
> >
> > Call:
> > garch(x = tail(hsc, 351))
> >
> > Model:
> > GARCH(1,1)
> >
> > Residuals:
> >       Min        1Q    Median        3Q       Max
> > -4.171521 -0.424628  0.008727  0.532158  3.962116
> >
> > Coefficient(s):
> >     Estimate  Std. Error  t value Pr(>|t|)
> > a0 2.511e-05   1.589e-05    1.580 0.114167
> > a1 1.043e-01   2.950e-02    3.536 0.000406 ***
> > b1 8.957e-01   2.567e-02   34.896  < 2e-16 ***
> > ---
> > Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
> >
> > Diagnostic Tests:
> >         Jarque Bera Test
> >
> > data:  Residuals
> > X-squared = 76.3704, df = 2, p-value < 2.2e-16
> >
> >
> >         Box-Ljung test
> >
> > data:  Squared.Residuals
> > X-squared = 1.2806, df = 1, p-value = 0.2578
> >
> > still ok. Now finally we get t the point of this email lets look at
> 352
> > days of data:
> >
> > garch352<-garch(tail(hsc,352))
> >
> > ***** ESTIMATION WITH ANALYTICAL GRADIENT *****
> >
> >
> > Warning message:
> > NaNs produced in: sqrt(pred$e)
> > > summary(garch352)
> >
> > Call:
> > garch(x = tail(hsc, 352))
> >
> > Model:
> > GARCH(1,1)
> >
> > Residuals:
> >      Min       1Q   Median       3Q      Max
> > -4.16377 -0.58155  0.01454  0.70886 12.41242
> >
> > Coefficient(s):
> >     Estimate  Std. Error  t value Pr(>|t|)
> > a0 2.428e-05   1.556e-05    1.561 0.118632
> > a1 1.043e-01   2.947e-02    3.540 0.000400 ***
> > b1 8.962e-01   2.556e-02   35.058  < 2e-16 ***
> > ---
> > Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
> >
> > Diagnostic Tests:
> >         Jarque Bera Test
> >
> > data:  Residuals
> > X-squared = 10993.57, df = 2, p-value < 2.2e-16
> >
> >
> >         Box-Ljung test
> >
> > data:  Squared.Residuals
> > X-squared = 0.1831, df = 1, p-value = 0.6687
> >
> > whats up? Any Ideas.
> > I have also tried using garchFit from the fSeries package but it
> locks
> > up completely left it running last night and it was still spinning
> this
> > morning when I got back to the office.
> >
> > thanks in advance
> >
> > michael
> >
> > _______________________________________________
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> > https://stat.ethz.ch/mailman/listinfo/r-sig-finance
> >
>