Garch with dail of the week Dummy Variable do not work


#1

Hi guys

I am trying in R to use Garch(1,1) to estimate the influence of day of the week, and also later other parameters, on my log return (ln(Pt/Pt-1))of Product sells

I have all setuped in a csv file and for each Day a dummy variable (D1,D2) with 1 or 0 as value

I am building the following model in R

#Bind Data
ext.reg.D1 <- mydata$D1
ext.reg.D2 <- mydata$D2
ext.reg.D3 <- mydata$D3
ext.reg.D4 <- mydata$D4
ext.reg.D5 <- mydata$D5
ext.reg.D6 <- mydata$D6
ext.reg.D7 <- mydata$D7
ext.reg   <- cbind(ext.reg.D1, ext.reg.D2,   ext.reg.D3,ext.reg.D4,ext.reg.D5,ext.reg.D6)
y <- mydata$log_return

fit.spec <- ugarchspec(variance.model     = list(model = "gjrGARCH",
                                             garchOrder = c(1, 1),
                                             external.regressors = ext.reg
                                             ), 
                   mean.model         = list(armaOrder = c(1, 0),
                                             include.mean = TRUE,
                                             external.regressors = ext.reg), 
                   distribution.model = "norm")
fit      <- ugarchfit(data = y, spec = fit.spec)
fit

I have no idea what is wrong. Also is it possible to use Newey West, or any other procedure to correct ? My data still has Autocorrelation at unknown lags

Some data

       log_return D5 D6 D7 D1 D2 D3 D4
1    -0.02979189  1  0  0  0  0  0  0
2    17.43188265  0  1  0  0  0  0  0
3    -9.12727223  0  0  1  0  0  0  0
4     2.77744081  0  0  0  1  0  0  0
5     9.62597392  0  0  0  0  1  0  0
6    -0.11614358  0  0  0  0  0  1  0
7    10.81279075  0  0  0  0  0  0  1
8    -1.03825650  1  0  0  0  0  0  0
9    -5.49109661  0  1  0  0  0  0  0
10  -16.81177602  0  0  1  0  0  0  0
11    9.74292804  0  0  0  1  0  0  0
12   15.22583595  0  0  0  0  1  0  0
13   -1.79578436  0  0  0  0  0  1  0
14    0.40559431  0  0  0  0  0  0  1
15   -2.38281092  1  0  0  0  0  0  0
16   -4.88853323  0  1  0  0  0  0  0
17  -16.98493635  0  0  1  0  0  0  0
18    7.57998016  0  0  0  1  0  0  0
19   17.56008274  0  0  0  0  1  0  0
20   -0.46754932  0  0  0  0  0  1  0
21   -1.27007966  0  0  0  0  0  0  1
22   -1.79234966  1  0  0  0  0  0  0
23   -5.79461986  0  1  0  0  0  0  0
24  -17.82636881  0  0  1  0  0  0  0
25    9.48124679  0  0  0  1  0  0  0
26   17.64277207  0  0  0  0  1  0  0
27   -0.71191725  0  0  0  0  0  1  0
28   -1.14937870  0  0  0  0  0  0  1
29   -1.62331777  1  0  0  0  0  0  0
30   -5.52787401  0  1  0  0  0  0  0
31  -18.50034717  0  0  1  0  0  0  0
32   10.31502542  0  0  0  1  0  0  0
33   16.21997258  0  0  0  0  1  0  0
34   -1.09910695  0  0  0  0  0  1  0
35   -0.57416519  0  0  0  0  0  0  1
36   -1.83623328  1  0  0  0  0  0  0
37   -5.48021232  0  1  0  0  0  0  0
38  -20.02869823  0  0  1  0  0  0  0
39   11.48799875  0  0  0  1  0  0  0
40   17.55356524  0  0  0  0  1  0  0
41   -1.45430558  0  0  0  0  0  1  0
42   -2.15287757  0  0  0  0  0  0  1
43   -4.91058837  1  0  0  0  0  0  0
44   -4.35107354  0  1  0  0  0  0  0
45  -19.40533612  0  0  1  0  0  0  0
46    6.47785167  0  0  0  1  0  0  0
47   16.54500844  0  0  0  0  1  0  0
48    1.43266482  0  0  0  0  0  1  0
49    1.91234500  0  0  0  0  0  0  1
50   -1.44926252  1  0  0  0  0  0  0
51   -5.69296574  0  1  0  0  0  0  0
52  -14.21241905  0  0  1  0  0  0  0
53    9.85180551  0  0  0  1  0  0  0
54   16.72072000  0  0  0  0  1  0  0
55   -1.04381003  0  0  0  0  0  1  0
56   -1.49048390  0  0  0  0  0  0  1
57   -2.57835848  1  0  0  0  0  0  0
58   -2.93456505  0  1  0  0  0  0  0
59  -21.27981318  0  0  1  0  0  0  0
60   14.27747712  0  0  0  1  0  0  0
61   15.20376637  0  0  0  0  1  0  0
62   -2.36474181  0  0  0  0  0  1  0
63   -0.12825700  0  0  0  0  0  0  1
64   -2.17755007  1  0  0  0  0  0  0
65   -6.50236487  0  1  0  0  0  0  0
66  -20.40159745  0  0  1  0  0  0  0
67   10.12381534  0  0  0  1  0  0  0
68   19.34672964  0  0  0  0  1  0  0
69   -0.18663788  0  0  0  0  0  1  0
70   -1.26430704  0  0  0  0  0  0  1
71   -2.17712050  1  0  0  0  0  0  0
72   -5.20850527  0  1  0  0  0  0  0
73  -19.00303225  0  0  1  0  0  0  0
74   10.78960865  0  0  0  1  0  0  0
75   16.50911599  0  0  0  0  1  0  0
76   -1.20629718  0  0  0  0  0  1  0
77   -0.92077350  0  0  0  0  0  0  1
78   -2.13818901  1  0  0  0  0  0  0
79   -6.39795596  0  1  0  0  0  0  0
80  -16.89947946  0  0  1  0  0  0  0
81   11.84070286  0  0  0  1  0  0  0
82   16.76126417  0  0  0  0  1  0  0
83   -2.32992683  0  0  0  0  0  1  0
84   -0.04347497  0  0  0  0  0  0  1
85   -1.58421553  1  0  0  0  0  0  0
86   -5.11294741  0  1  0  0  0  0  0
87  -22.94382512  0  0  1  0  0  0  0
88   12.08906834  0  0  0  1  0  0  0
89   18.59588505  0  0  0  0  1  0  0
90   -0.66190281  0  0  0  0  0  1  0
91   -3.35891858  0  0  0  0  0  0  1
92   -5.56096067  1  0  0  0  0  0  0
93  -19.12946131  0  1  0  0  0  0  0
94   -2.45717082  0  0  1  0  0  0  0
95   -6.00314421  0  0  0  1  0  0  0
96   16.87403882  0  0  0  0  1  0  0
97   16.72700765  0  0  0  0  0  1  0
98   -1.80683941  0  0  0  0  0  0  1
99   -2.08228231  1  0  0  0  0  0  0
100  -5.98864409  0  1  0  0  0  0  0
101 -14.91991224  0  0  1  0  0  0  0