(G)ARCH estimation. Input series.

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Dmitry Guzairov
Dmitry Guzairov on 7 Jun 2018
Answered: Hang Qian on 7 Jun 2018
After declaring a "default" garch model such as: model = garch(1,1); estimates = estimate(model, y); y should be return series or should it be residuals(squared) from mean models (arima for example)? i think an "offset" option inside model specification could be usefull, but have no clue about it.

Accepted Answer

Hang Qian
Hang Qian on 7 Jun 2018
Hi Dmitry,
If we have obtained the residuals, then we can create a GARCH model and just estimate the variance equation, like
model = garch(1,1);
estimate(model, y);
Also, we can directly estimate an ARIMA model with GARCH errors, so that both the mean equation and the variable equation are estimated simultaneously. For example,
Mdl = arima(1,0,1);
Mdl.Variance = garch(1,1);
estimate(Mdl,y);
Regards,
Hang Qian

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