In the previous exercises, we have assumed a constant mean by setting
garchspec <- ugarchspec(mean.model = list(armaOrder = c(0,0)), variance.model = list(model = "gjrGARCH"), distribution.model = "sstd")
In practice the predicted return \(\mu_t\) is often time-varying. To capture this time-variation, one can use a GARCH-in-mean, AR(1), MA(1), ARMA(1,1) model, among others.
These models are implemented in
rugarch and can be specified by changing the arguments for
Which of the following statements is incorrect?