[R-SIG-Finance] Problems when estimating GARCH parameters with fGarch

[Robert Harlow]

Have you tried rugarch or just "garch" in the tseries package?  Reproducible examples are always helpful as well.

> On Nov 2, 2017, at 1:56 PM, Curtis Miller <cgmil at msn.com> wrote:
> 
> Hello all,
> 
> 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 
> unreliable.
> 
> 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: 
> https://ntguardian.wordpress.com/2017/11/02/problems-estimating-garch-parameters-r/
> 
> 
> Curtis
> 
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