[R-SIG-Finance] Problem with estimation results of ARMAX-GARCHX

[alexios ghalalanos]

Philipp,

In the presence of heteroscedasticity, there is a loss in the asymptotic
efficiency of the parameter estimates which are no longer BLUE (see the
original ARCH paper by Engle 1982). This effectively means that for most
datasets of length N (where N is some finite number), the parameters
will be somewhat different.
In the rugarch package, ARMA-GARCH is jointly estimated.

If you want to compare non-GARCH ARMA with the typical arima function in
R, use the arfimaspec/arfimafit functions (or set the ugarchspec
garchOrder to c(0,0) and the stationarity flag in the fit.control to 0).
You should also choose method="ML" for arima.

Regards,

Alexios

PS I could not download your dataset from dropbox (only the code).

On 18/09/2014 10:35, Philipp Lammers wrote:
> Hello everybody,
> 
>  
> 
> I am currently facing an estimation problem in the ARMAX-GARCHX model. The
> "rugarch"-package is used for estimation. The problem arises because my
> professor is not satisfied with the estimation results, he expects the
> ARMAX-GARCH results in the mean equation to be the same as the normal ARMAX
> results. But this is not the case and the results differ significantly. 
> 
>  
> 
> I already wrote to the programmer of the rugarch package, who thankfully
> gave me a hint , that the results are different under the presence of
> heteroskedasticity. He recommended me to post to this mailing list. Can
> anybody confirm that the results are different? Where can I find this issue
> in the literature?
> 
>  
> 
> My R-code can be downloaded from my Dropbox:
> https://www.dropbox.com/s/k557ev4lmmnykqu/ARMAGARCH.R?dl=0 .Note that the
> corresponding data will be downloaded from the Dropbox as well, when the
> code is executed.
> 
>  
> 
> I hope that you can help me.
> 
>  
> 
> Thank you all in advance.
> 
>  
> 
> Philipp Lammers
> 
>  
> 
> 
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> 
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