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

[Curtis Miller]

I only recently found out about rugarch. I’m going to try and look into that soon. I tried a quick test on a simulated time series and it seemed to have some similar behavior to what I observed with fGarch but I have not done as complete an investigation.



Curtis



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Today's Topics:

   1. Re: Problems when estimating GARCH parameters with        fGarch
      (Robert Harlow)


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Message: 1
Date: Fri, 3 Nov 2017 14:45:43 -0600
From: Robert Harlow <rharlow86 at gmail.com>
To: Curtis Miller <cgmil at msn.com>
Cc: "r-sig-finance at r-project.org" <r-sig-finance at r-project.org>
Subject: Re: [R-SIG-Finance] Problems when estimating GARCH parameters
        with    fGarch
Message-ID: <BBD3BA73-6E57-41CC-ACDC-5095F30C715A at gmail.com>
Content-Type: text/plain;       charset=us-ascii

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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