I have a question about my residuals. When testing for autocorrelation I come to the conclusion that the models (garch, Egarch, GJR a.k.a. Tarch) remove the correlation from the squared standardized residuals but not from the standardized residuals. Are my models misspecified?? I use returns from the FTSE, the DAX, and the S&P. These returns are (heavily) correlated, should a garch model remove the correlation of the returns? Or should it only remove the correlation of the squared returns?? Thanks.
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