[R-SIG-Finance] RUGARCH eGARCH and variance targeting

[alexios ghalanos]

Some of the bugs with variance.targeting options are still present in 
some of the methods. Until that is fixed (in the next update) read the 
vignette on how the unconditional variance is calculated for the eGARCH 
model (omega/(1-sum(beta))) which you can easily do using the extracted 
coefficients.
Also please do not keep attaching datasets to the mailing list. 
Bugs/Examples can easily be reproduced using the available pkg datasets 
or some randomly generated one.

-Alexios

On 29/06/2012 16:24, stoyan.stoyanov wrote:
> Hi all,
>
> Again, I am using the rugarch package to fit a GARCH model to an adjusted
> daily returns series. I am currently experimenting using an eGARCH instead
> of the TGARCH that I have been working with. However, once I use the
> variance targeting option with an eGARCH model my *unconditional* variance
> estimates just don't make sense - they take on values >1. I am curious
> whether this is caused by model mis-specification (eGARCH should not be used
> together with variance targeting), or whether it might be a bug in rugarch.
> Any thoughts?
> As always, code, data and output are below.
>
> *Code:*
> spec=ugarchspec(variance.model=list(model=eGARCH, garchOrder=c(1,1),
>                                        submodel=NULL,
> external.regressors=NULL, variance.targeting=TRUE),
>                  mean.model=list(armaOrder=c(2,2), include.mean=TRUE,
> archm=TRUE,
>                                     archpow=1, arfima=FALSE,
> external.regressors=NULL, archex=FALSE),
>                  distribution.model = "std", start.pars=list(),
> fixed.pars=list())
>
>   fit=ugarchfit(spec, data, out.sample=252, solver="solnp",
> solver.control=list(),
>                 fit.control=list(stationarity=1, fixed.se=0, scale=0))
>
> print(uncvariance(fit))
>
> *Output:*
> unconditional
>       1.000259
>
> *Data:*
> http://r.789695.n4.nabble.com/file/n4634896/data.csv data.csv
>
> Thank you,
> Stoyan
>
> -----
> Stoyan Stoyanov
> The University of Chicago Booth School of Business
> MBA Class of 2013
> (312) 532-0120 | stoyanov at chicagobooth.edu
> --
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>
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