[R-SIG-Finance] MAR-ARCH

[Patrick Burns]

Comparing estimators is a good idea.  But a good comparison
is more complex than stated.

What matters with garch is prediction, not estimation.  So we
want to test how good the predictions are.  For univariate we
can just compare the realized variance to the predicted variance
for a number of time periods.  It is best if this includes periods in
different volatility regimes.

For multivariate the comparison of realized to predicted is more
complex.  A couple of choices are to look at the maximum absolute
value of eigenvalues of the difference.  Another is to look at the
minimum variance portfolio.

If you do such testing, it becomes apparent that 1000 daily observations
is about as small as you want to go.  2000 observations is better, and even
more is probably good.


Patrick Burns
patrick at burns-stat.com
+44 (0)20 8525 0696
http://www.burns-stat.com
(home of S Poetry and "A Guide for the Unwilling S User")

Ajay Shah wrote:

>>1. Download the most recent version from
>>
>>http://www.vsthost.com/vstDocs/mgarchBEKK/release/mgarchBEKK_0.07-8.tar.gz
>>
>>2. untar/zip
>>tar xzf mgarchBEKK_0.07-8.tar.gz
>>
>>3. Fix _at_least_:
>>mvBEKK.est
>>line 475 has a trailing comma in the list of returned values after
>>residuals. - get rid of
>>
>>mvBEKK.sim
>>line 252 has a trailing comma in the list of returned values AS WELL.
>>- just delete it
>>
>>4. tarball back up for R CMD
>>tar czf mgarchBEKK_0.07-8.tar.gz mgarchBEKK
>>
>>5. R CMD INSTALL mgarchBEKK_0.07-8.tar.gz
>>    
>>
>
>Jeff,
>
>Thanks a lot! The mistakes you have identified (line 475 and line 252)
>are obvious syntax errors. It's a wonder that R tolerated them
>earlier.
>
>As is well known with MV Garch models, there are difficulties with
>convergence even with the example supplied with mvBEKK.est().
>
>What will be great is if someone with access to other MVGARCH codes
>will compare and contrast what mgarchBEKK reports for some standard
>problems. E.g. imagine a recent 1000-day time-series for USD/EUR,
>USD/JPY and USD/GBP. All three series are easily accessible from the
>US Fed website. It would be great to have reference estimates for what
>results come out for this problem from a few different codes with
>different starting values and algorithms. Unfortunately, I don't have
>any other MVGARCH codes so I'm not able to do this experimentation.
>
>  
>