[R-SIG-Finance] Problems when estimating GARCH parameters with fGarch
cgmil at msn.com
Thu Nov 2 20:56:55 CET 2017
I have encountered bad behavior in fGarch's garchFit() function used for
estimating the parameters of a GARCH model. The estimates behave in
highly erratic ways on simulated data. For example, when beta = 0.2
according to the simulation, the function sometimes estimates beta to be
0.0000001 even for sample sizes as large as 1000, and there are other
irregularities. I believe this behavior is tied to how the numerical
optimizers are computing the parameters.
In my research I planned on using garchFit() from fGarch in a
changepoint detection context. I was hoping to use it to detect
structural change in GARCH parameters. (See, for example, Ling 2007
paper https://arxiv.org/abs/0708.2369 .) But with this behavior I don't
know if such a test using garchFit() is possible; the estimates are too
Has anyone else observed this behavior? Is there a way to get around it?
I'm hoping someone who knows more about this can offer guidance.
I have written a blog post documenting the behavior I observed, with
numerical experiments. Here is a link:
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