Forecasting Time Series

ARCH Models

Preamble

library("forecast")
library("rugarch")

Loading required package: methods

Loading required package: parallel

Attaching package: 'rugarch'

The following object is masked from 'package:stats':

    sigma

ARCH(1)

n <- 500
time <- 1:n

for (i in 1:5) {
    arch1.spec = ugarchspec(variance.model = list(garchOrder=c(1,0)), 
                        mean.model = list(armaOrder=c(0,0)),
                        fixed.pars=list(mu = 0, omega=0.25, alpha1=0.5))
    arch1.sim <- ugarchpath(arch1.spec, n.sim=n)
    arch1 <- drop(arch1.sim@path$seriesSim)
    arch1.int <- cumsum(arch1)

    par(mfrow=c(1,2))
    plot(time, arch1, col=2, type="l")
    plot(time, arch1.int, col=2, type="l")
}

ARCH(2)

n <- 500
time <- 1:n

for (i in 1:5) {
    arch2.spec = ugarchspec(variance.model = list(garchOrder=c(2,0)), 
                            mean.model = list(armaOrder=c(0,0)),
                            fixed.pars=list(mu = 0, omega=0.25, alpha1=0.6, alpha2=0.35))
    arch2.sim <- ugarchpath(arch2.spec, n.sim=n)
    arch2 <- drop(arch2.sim@path$seriesSim)
    arch2.int <- cumsum(arch2)
    
    par(mfrow=c(1,2))
    plot(time, arch2, col=3, type="l")
    plot(time, arch2.int, col=3, type="l")
}

ARCH(1) ACFs, PACFs

Original Series

par(mfrow=c(1,2))
Acf(arch1)
Pacf(arch1)

Squares

par(mfrow=c(1,2))
Acf(arch1^2)
Pacf(arch1^2)

ARCH(2) ACFs, PACFs

Original Series

par(mfrow=c(1,2))
Acf(arch2)
Pacf(arch2)

Squares

par(mfrow=c(1,2))
Acf(arch2^2)
Pacf(arch2^2)