Ljung box test

[Nidhi Dhankhar]

I am conducting garch modeling in r studio. In this I selected the students t distribution and perform garch (1,1) test. After specification  and model fitting I got the significant parameters.  But further in weighted Ljung box test on residuals i got standardized residual insignificant and standardized square residual significant which indicated the present of ARCH effect which means that my model is not fit for further analysis.

So anyone please tell me what should I do

Thanks and regards 

Nidhi 

Research scholar 

CCS HAU hisar

[Miklesh Yadav]

Dear Nidhi,

It is not like there should be no arch effect.

It is one of the pre-conditions to employ GARCH that there should be presence of ARCH effect. If it does not exist, you have to employ unconditional variance with the help of standard deviation.

Regards

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[Nidhi Dhankhar]

No sir , 

All the precondition of garch model is fulfilled ( stationarity,  volatility  clustering,  arch effect ) 

After the parameters estimation weighted ljung box is apply to check the remaining arch effect in residuals . 

So in one case it show significant  result and in another case it show insignificant result. So I just want to know how I take my study further. 

Here I attach my result for weighted ljung box for residual ans square residuals 

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[Miklesh Yadav]

If pre-conditions are met, go ahead with GARCH result.

No need to be panic post result for ARCH effect. 

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