[R-SIG-Finance] setting persistence upper limit in garchFit()

Patrick Burns patrick at burns-stat.com
Wed Aug 19 19:48:48 CEST 2009

I don't know the answer to your question,
but I have a guess of what your data are
like.  The sum of the two parameters in
garch(1,1) is essentially telling you the
time it takes for the volatility from a
shock to damp down.  If there is a trend
in the volatility over the time frame of
the data, then the estimation is likely
to "think" that it hasn't seen the volatility
damp down -- hence an infinite waiting
time and a sum of the parameters more than 1.

More data can often help the problem.

Another piece of software whose existence
I'm doubtful of would be a Bayesian estimate
of the model.

Patrick Burns
patrick at burns-stat.com
+44 (0)20 8525 0696
(home of "The R Inferno" and "A Guide for the Unwilling S User")

wc90024-email at yahoo.com wrote:
> I'm using garchFit() on a volatile time series.   I'd like to set a limit such that the SUM(alpha, beta) < 1.   Is there a way to configure that by passing a parameter into garchFit()?   Or is there another way to do it?  Thanks.
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