[R-SIG-Finance] About Garch models

Patrick Burns patrick at burns-stat.com
Tue Sep 18 13:14:46 CEST 2012

You should *not* believe the Ljung-Box
test.  For an explanation of why, see:



On 18/09/2012 11:55, jaimie villanueva wrote:
> Hi R users,
> I'm trying to fit an ARMA or GARCH or ARMA/GARCH model over a financial
> time series of daily Log returns.
> I've followed the same procedure as most texts are recommending in order to
> check whether an autocorrelation structure exist (either on residuals or
> squared residuals) or not. After run the Ljung-Box and LM ARCH test over
> squared residuals and I realise that NO autocorrelation structure exist, I
> supposed that, if i try to fit a GARCH model the fitting results would be
> quite useless.
> Instead of that, I've found that the fitting was pretty good.
> The question is: Should I go ahead with the GARCH model or Should i belive
> the Ljung-Box and LM ARCH test ?.
> Thanks in advance.
> Jaimie
> 	[[alternative HTML version deleted]]
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Patrick Burns
patrick at burns-stat.com
twitter: @portfolioprobe

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