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Chicago Boothf Garch Script

1) The document discusses fitting GARCH models to financial time series data using the fGarch package in R. 2) A GARCH(3,0) model is initially estimated for Intel stock return data, and diagnostic checks are performed on the output. 3) Additional GARCH models with different specifications, such as GARCH(1,0) and conditional distributions, are also estimated for comparison.

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54 views6 pages

Chicago Boothf Garch Script

1) The document discusses fitting GARCH models to financial time series data using the fGarch package in R. 2) A GARCH(3,0) model is initially estimated for Intel stock return data, and diagnostic checks are performed on the output. 3) Additional GARCH models with different specifications, such as GARCH(1,0) and conditional distributions, are also estimated for comparison.

Uploaded by

datsno
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

6/18/12 5:52 PM

fGarch package
**** For more details, please download a copy of the fGarch document from the R mirror.
**** The document is fGarch.pdf.
****
**** Output edited ***
> setwd("C:/Users/rst/teaching/bs41202/sp2010")
> da=read.table("m-intc7303.txt")
> intc=log(da[,2]+1)
> library(fGarch)

> help(garchFit,package="fGarch")

> m1=garchFit(~garch(3,0),data=intc)

Series Initialization:
ARMA Model: arma
Formula Mean: ~ arma(0, 0)
GARCH Model: garch
Formula Variance: ~ garch(3, 0)
ARMA Order: 0 0
Max ARMA Order: 0
GARCH Order: 3 0
Max GARCH Order: 3
Maximum Order: 3
Conditional Dist: norm
h.start: 4
llh.start: 1
Length of Series: 372
Recursion Init: mci
Series Scale: 0.1337381 <=== Sample standard error

Parameter Initialization:
Initial Parameters: $params
Limits of Transformations: $U, $V
Which Parameters are Fixed? $includes
Parameter Matrix:
U V params includes
mu -1.34515434 1.345154 0.13451543 TRUE
omega 0.00000100 100.000000 0.10000000 TRUE
alpha1 0.00000001 1.000000 0.03333333 TRUE
alpha2 0.00000001 1.000000 0.03333333 TRUE
alpha3 0.00000001 1.000000 0.03333333 TRUE
gamma1 -0.99999999 1.000000 0.10000000 FALSE
gamma2 -0.99999999 1.000000 0.10000000 FALSE
gamma3 -0.99999999 1.000000 0.10000000 FALSE
delta 0.00000000 2.000000 2.00000000 FALSE
skew 0.10000000 10.000000 1.00000000 FALSE
shape 1.00000000 10.000000 4.00000000 FALSE
Index List of Parameters to be Optimized:
mu omega alpha1 alpha2 alpha3
1 2 3 4 5
Persistence: 0.1

--- START OF TRACE ---


Selected Algorithm: nlminb <=== Omptimization method used by R.

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R coded nlminb Solver:

0: 1032.0260: 0.134515 0.100000 0.0333333 0.0333333 0.0333333


1: 548.38921: 0.134307 0.860030 0.459424 0.387068 0.373436
.......
31: 514.98790: 0.123916 0.673341 0.208649 0.0718372 0.0490449

Final Estimate of the Negative LLH:


LLH: -233.4286 norm LLH: -0.6274962
mu omega alpha1 alpha2 alpha3
0.01657227 0.01204329 0.20864875 0.07183715 0.04904486

R-optimhess Difference Approximated Hessian Matrix:


mu omega alpha1 alpha2 alpha3
mu -24544.40441 5432.428 -79.56617 -31.75056 -163.7026
omega 5432.42796 -769914.108 -7009.25413 -6934.08249 -8244.4917
alpha1 -79.56617 -7009.254 -137.50812 -127.67375 -127.2846
alpha2 -31.75056 -6934.082 -127.67375 -543.26368 -118.8571
alpha3 -163.70256 -8244.492 -127.28460 -118.85710 -545.1020
attr(,"time")
Time difference of 0.04999995 secs

--- END OF TRACE ---

Time to Estimate Parameters:


Time difference of 0.2449999 secs

> m1 <== Obtain estimation results [You may use summary(m1) to include model chekcing
statistics]

Title:
GARCH Modelling

Call:
garchFit(formula = ~garch(3, 0), data = intc)

Mean and Variance Equation:


data ~ garch(3, 0)
[data = intc]

Conditional Distribution:
norm

Coefficient(s):
mu omega alpha1 alpha2 alpha3
0.016572 0.012043 0.208649 0.071837 0.049045

Std. Errors:
based on Hessian

Error Analysis:
Estimate Std. Error t value Pr(>|t|)
mu 0.016572 0.006423 2.580 0.00988 **
omega 0.012043 0.001579 7.627 2.4e-14 ***
alpha1 0.208649 0.129177 1.615 0.10626
alpha2 0.071837 0.048551 1.480 0.13897
alpha3 0.049045 0.048847 1.004 0.31536

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---

Log Likelihood:
233.4286 normalized: 0.6274962

> m1=garchFit(~garch(1,0),data=intc,trace=F) <== Without details of estimation

> m1

Title:
GARCH Modelling

Call:
garchFit(formula = ~garch(1, 0), data = intc)

Mean and Variance Equation:


data ~ garch(1, 0)
[data = intc]

Conditional Distribution:
norm

Coefficient(s):
mu omega alpha1
0.016570 0.012490 0.363447

Std. Errors:
based on Hessian

Error Analysis:
Estimate Std. Error t value Pr(>|t|)
mu 0.016570 0.006161 2.689 0.00716 **
omega 0.012490 0.001549 8.061 6.66e-16 ***
alpha1 0.363447 0.131598 2.762 0.00575 **
---

Log Likelihood:
230.2423 normalized: 0.6189309

> plot(m1@residuals,type='l')
> plot([email protected],type='l')
>
> m1=garchFit(~garch(1,0),data=intc,cond.dist=c("std"))

Series Initialization:
ARMA Model: arma
Formula Mean: ~ arma(0, 0)
GARCH Model: garch
Formula Variance: ~ garch(1, 0)
ARMA Order: 0 0
Max ARMA Order: 0
GARCH Order: 1 0
Max GARCH Order: 1
Maximum Order: 1
Conditional Dist: std
h.start: 2
llh.start: 1

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Length of Series: 372


Recursion Init: mci
Series Scale: 0.1337381

Parameter Initialization:
Initial Parameters: $params
Limits of Transformations: $U, $V
Which Parameters are Fixed? $includes
Parameter Matrix:
U V params includes
mu -1.34515434 1.345154 0.1345154 TRUE
omega 0.00000100 100.000000 0.1000000 TRUE
alpha1 0.00000001 1.000000 0.1000000 TRUE
gamma1 -0.99999999 1.000000 0.1000000 FALSE
delta 0.00000000 2.000000 2.0000000 FALSE
skew 0.10000000 10.000000 1.0000000 FALSE
shape 1.00000000 10.000000 4.0000000 TRUE
Index List of Parameters to be Optimized:
mu omega alpha1 shape
1 2 3 7
Persistence: 0.1

--- START OF TRACE ---


Selected Algorithm: nlminb

R coded nlminb Solver:

0: 751.30286: 0.134515 0.100000 0.100000 4.00000


1: 509.26981: 0.134724 1.03838 0.445570 4.00487
.......
15: 505.44871: 0.161293 0.750519 0.259867 5.98598

Final Estimate of the Negative LLH:


LLH: -242.9678 norm LLH: -0.6531391
mu omega alpha1 shape
0.02157100 0.01342368 0.25986664 5.98597870

R-optimhess Difference Approximated Hessian Matrix:


mu omega alpha1 shape
mu -27906.18222 -359.7564 -142.562477 -11.9639582
omega -359.75643 -499571.6752 -4035.320804 -302.7922516
alpha1 -142.56248 -4035.3208 -102.960480 -2.7019238
shape -11.96396 -302.7923 -2.701924 -0.5519108
attr(,"time")
Time difference of 0.03200006 secs

--- END OF TRACE ---

Time to Estimate Parameters:


Time difference of 0.125 secs
> m1

Title:
GARCH Modelling

Call:

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garchFit(formula = ~garch(1, 0), data = intc, cond.dist = c("std"))

Mean and Variance Equation:


data ~ garch(1, 0)
[data = intc]

Conditional Distribution:
std

Coefficient(s):
mu omega alpha1 shape
0.021571 0.013424 0.259867 5.985979

Std. Errors:
based on Hessian

Error Analysis:
Estimate Std. Error t value Pr(>|t|)
mu 0.021571 0.006054 3.563 0.000366 ***
omega 0.013424 0.001968 6.820 9.09e-12 ***
alpha1 0.259867 0.119901 2.167 0.030209 *
shape 5.985979 1.660030 3.606 0.000311 ***
---

Log Likelihood:
242.9678 normalized: 0.6531391

> m1=garchFit(~garch(1,0),data=intc,cond.dist=c("std"),trace=F) <=== Without details of


estimation
> m1

Title:
GARCH Modelling

Call:
garchFit(formula = ~garch(1, 0), data = intc, cond.dist = c("std"),
trace = F)

Mean and Variance Equation:


data ~ garch(1, 0)
[data = intc]

Conditional Distribution:
std

Coefficient(s):
mu omega alpha1 shape
0.021571 0.013424 0.259867 5.985979

Std. Errors:
based on Hessian

Error Analysis:
Estimate Std. Error t value Pr(>|t|)
mu 0.021571 0.006054 3.563 0.000366 ***
omega 0.013424 0.001968 6.820 9.09e-12 ***
alpha1 0.259867 0.119901 2.167 0.030209 *

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shape 5.985979 1.660030 3.606 0.000311 ***


---
Log Likelihood:
242.9678 normalized: 0.6531391

> sresi=m1@residuals/[email protected] <=== Obtain standardized residuals


> Box.test(sresi,lag=10,type='Ljung')

Box-Ljung test

data: sresi
X-squared = 14.3129, df = 10, p-value = 0.1592

> Box.test(sresi^2,lag=10,type='Ljung')

Box-Ljung test

data: sresi^2
X-squared = 15.3592, df = 10, p-value = 0.1195

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