[R-SIG-Finance] rugarch parameter analysis

[alexios ghalanos]

Geoff,

The model is detailed on page 7 of the vignette (Section 2.2.3) and I
think it is clear what the output gives in terms of the sign (alpha) and
size/leverage (gamma) effects. The example you provided is also part of
the rugarch benchmark suite based on published results:

>ugarchbench("published")

This example is from the Brooks et al review: "Benchmarks and the
accuracy of GARCH model estimation", in 'International Journal of
Forecasting' 17 (2001) 45–56. In their paper, equation 8 is similar to
what I give for the specification with the difference that they switch
alpha for gamma and gamma for alpha. In my opinion this is wrong since
gamma has always been reserved for the asymmetric shocks.
In any case, once you've done the switching the results are the same and
also available here:
http://web.stanford.edu/~clint/bench/

Regards,

Alexios



On 18/08/2014 15:42, Geoffrey Smith wrote:
> Could someone please tell me whether the "leverage effect" parameter in the
> EGARCH model represents the difference between the effect of a positive and
> negative shock on future volatility?  In other words, does the estimate of
> "alpha1" that is output by the code below represent the difference between
> the effect of a positive and negative shock on future volatility?  And
> because "alpha1" is -0.0385, this means that the effect of a negative shock
> is greater than the effect of a positive shock?  Thank you.
> 
> library(rugarch)
> 
> data(dmbp)
> 
> spec <- ugarchspec(mean.model=list(armaOrder=c(0,0), include.mean=TRUE),
> variance.model=list(model='eGARCH', garchOrder=c(1,1)))
> 
> fit <- ugarchfit(data = dmbp[,1], spec = spec)
> 
> coef(fit)
> 
> 	[[alternative HTML version deleted]]
> 
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