ARMA-GARCH model and dummy variables MATLAB
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I have an array of percentage returns that I want to run dummy variables on in order to extract certain values for certain dates of the month. I want to fit a ARMA-GARCH model to this. This is what I do:
EstMdl = estimate(Mdl,Reg_var_SSE)
Reg_var_SSE is a 6260x21 matrix with returns in column 1 and intercept plus dummy variables in 2:21.
Looks like this:
I get the error message:
Error using arima/estimate (line 224) Input response series data must be non-empty and a column vector.
Probably estimate() is not meant to be used this way, but this is want I want to do.
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Answers (1)
Brendan Hamm
on 10 Apr 2015
The second input to the estimate function should be the "univariate time series", so we cannot pass a matrix as this argument. What are you trying to do with the dummy-variables here? Is it that you want to estimate the parameters of different GARCH models for each of these groups?
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Brendan Hamm
on 13 Apr 2015
I cannot see what you think the model would be using dummy variables and it does not seem to make much sense to do this. In a GARCH model your returns would be regressed on by the previous values, so your predictor variables are the same as the response variables excepting they are lagged. This is not like a regression model with categorical predictors where the dummy variables consider grouping. So try and take a step back and ask yourself what this model would like like mathematically. You will likely find yourself either landing on using monthly lags to account for this (likely your only option) or trying a new approach entirely. I would only use monthly lags if there was evidence to support the seasonality in the data.
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