Get startedGet started for free

Predicting returns

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 mean.model.


Which of the following statements is incorrect?

This exercise is part of the course

GARCH Models in R

View Course

Hands-on interactive exercise

Turn theory into action with one of our interactive exercises

Start Exercise