[R-SIG-Finance] About Garch models

[Patrick Burns]

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

http://www.portfolioprobe.com/2012/07/06/a-practical-introduction-to-garch-modeling/

Pat


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
http://www.burns-stat.com
http://www.portfolioprobe.com/blog
twitter: @portfolioprobe