Dear list,
I am trying to compare the fitted sigma of the realGARCH model with my realized
volatility input. However these two time series have completely different
values. My realizedVol input has a values of around 0.004-0.010, while the
fitted sigma output has values of around 0.001-0.003 and I am trying to
understand why.
Below I walk through my code:
My model specification fitting below, where,return_c2casxts - daily
close-to-close return object (an xts object)RVar_BN2008 - Daily realized
variance measure (using realized kernel of Bandorff Nielsen 2008)
spec.realGARCH21 <- ugarchspec(variance.model = list(model = "realGARCH",
garchOrder = c(2,1)), mean.model = list(armaOrder = c(1,1)),
distribution.model =
"std")garch_model<-ugarchfit(spec.realGARCH21, return_c2casxts, solver =
'hybrid', realizedVol=sqrt(RVar_BN2008))
RVolfitted<-garch_model@fit$sigma
Now comparing RVolfitted and sqrt(RVar_BN2008)below I have completely different
values throughput the series (3500 days in total).
RVolfitted:" 0.0020383691 0.0018783530 0.0020688548 0.0015357892
0.0016052453 0.0016191145sqrt(RVar_BN2008): 0.006596078 0.008683373
0.004344591 0.006393453 0.006223041 0.008463817
Is this a conceptual issue on my part on what sigma signifies here? How can I
obtain fitted values corresponding to the realizedVol input?
Best Regards,Duco
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