Re: [Gretl-users] ARCH and GARCH

On Tue, 1 Mar 2011, zhuhongming wrote: They don't give the same results because (a) the estimators are completely different and (b) the model is misspecified. gretl's "arch" command is not much recommended other than for pedagogical purposes; it's a rather basic feasible generalized least squares thing (as explained in the help text), while the "garch" command does the job properly via Maximum Likelihood. In some cases the estimates may be fairly close, but I suspect that misspecification here has something to do with the big gap between the sets of alpha estimates. I say the model is misspecified because if you run a GARCH(1,1) you'll see that it dominates GARCH(0,2): the likelihood is much higher. open nasdaq.dat setobs 1 1 --special garch 0 2 ; re const ll02 = $lnl garch 1 1 ; re const lldiff = $lnl - ll02 Allin Cottrell