[Gretl-users] arima + arch ?

[Riccardo (Jack) Lucchetti]

On Tue, 5 Jun 2007, Chris wrote:

> is there any way to combine arima with arch? Is this a stupid question? When
> I run the arima stuff I get a fantastic fit to the data, but when I run the
> arch test it shows I definitely have an arch process.

At the moment there is no native command that allows you to run a combined 
ARMA+ARCH model in gretl. You have 2 alternatives:

1) If your arma model doesn't include a MA part, just add lags of the 
dependent variable as regressors: this will give you conditional maximum 
likelihood, which is asymptotically equivalent to full ML.

2) If you really need full ML, you can write a function taking the 
observed series and the parameters as input and returning the 
one-step-ahead prediction errors plus the conditional variances and stick 
that into an mle block. You can use the attached script (rough 
proof-of-concept) as a template.


Riccardo (Jack) Lucchetti
Dipartimento di Economia
Università Politecnica delle Marche

r.lucchetti at univpm.it
http://www.econ.univpm.it/lucchetti
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