Testing GARCH coefficients: Likelihood ratio test (Excel)

[@NEDLeducation]

You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7 Please consider supporting NEDL on Patreon: www.patreon.com/NEDLeducation

[@PepegaReformed]

Greetings from greece !!! i just found out this channel 2 days ago and started immediately to watch your video chronologicaly !! You are a gold mine you deserve a lot more subscribers !! you rock

[@MrMahankumar]

NEDL rocks!

[@revgro]

Another nice video. I like all of your videos, but I especially like your volatility-related videos. Can you do a video on Fractal Brownian Motion and Rough Volatility? And, how that type of model compares with ARCH, GARCH, etc? Does it provide a worthwhile improvement in fit or performance? Can it be implemented in Excel like your other models, or is it best to stick to the available R packages (yuima, somebm, fbm, circfbm, etc)? Thanks.

[@NEDLeducation]

Hi, and glad you liked the video! As for your suggestion, this is definitely an area of finance I seek to explore to greater extent sometime in the future!

[@komaljindal3242]

Can I apply this likelihood ratio test for Markov regime switching model against the null hypothesis of linear model or no regime model.

[@NEDLeducation]

Hi Komal, and thanks for the question! Yes you can, but the implementation is less straightforward than you might think, have a look at this paper, for instance: www.jstor.org/stable/pdf/2346299.pdf

[@davidhofer6444]

Hey there, using AIC and BIC criteria, i came to the conclusion that i should be using an ARCH(2) Model except for an ARCH (1) like above. How would I change the parameters/formula shown above thats applied as a "one formula fits all" to include the second lag for ARCH (2) as well. Thanks in advance :)

[@NEDLeducation]

Hi David, and glad you applied the materials from the tutorial for your own data. You can simply introduce an additional coefficient and refer to two lags of the squared residual.