Dear all R user, Please forgive me if my problem is too simple. Actually my problem is basically Statistical rather directly R related. Suppose I have return series ret with mean zero. And I want to fit a Garch(1,1) on this.
my is r[t] = h[i]*z[t] h[t] = w + alpha*r[t-1]^2 + beta*h[t-1] I want to estimate the three parameters here; the R syntax is as follows: # download data: data(EuStockMarkets) r <- diff(log(EuStockMarkets))[,"DAX"] r = r - mean(r) # fit a garch(1,1) on this: library(tseries) garch(r) The estimated parameters are given below: ***** ESTIMATION WITH ANALYTICAL GRADIENT ***** Call: garch(x = r) Coefficient(s): a0 a1 b1 4.746e-06 6.837e-02 8.877e-01 Now it is straightforward to transform Garch(1,1) to a ARMA like this: r[t]^2 = w + (alpha+beta)*r[t-1]^2 + beta*(h[t-1] - r[t-1]^2) - (h[t] - r[t]^2) = w + (alpha+beta)*r[t-1]^2 + beta*theta[t-1] + theta[t] So if I fit a ARMA(1,1) on r[t]^2 I am getting following result; arma(r^2, order=c(1,1)) Call: arma(x = r^2, order = c(1, 1)) Coefficient(s): ar1 ma1 intercept 9.157e-01 -8.398e-01 9.033e-06 Therefore if the above derivation is correct then I should get a same intercept term for both Garch and ARMA case. But here I am not getting it. Can anyone explain why? Any input will be highly appreciated. Thanks and regards, Megh ____________________________________________________________________________________ Sponsored Link Degrees online in as fast as 1 Yr - MBA, Bachelor's, Master's, Associate Click now to apply http://yahoo.degrees.info ______________________________________________ R-help@stat.math.ethz.ch mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.