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Arima Garch 11 Modelling and Forecasting for a Ge Stock Price Using r

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ARIMA/GARCH (1,1) MODELLING AND FORECASTING FOR A GE STOCK

PRICE USING R

Varun Malik

Dyal Singh College

University of Delhi India

varunmalikphy@gmail.com

ABSTRACT

This article attempts to present a basic method of time series analysis, modelling and forecasting

performance of ARIMA, GARCH (1,1) and mixed ARIMA - GARCH (1,1) models using historical daily

close price downloaded through the yahoo finance website from the NASDAQ stock exchange for GE

company (USA) during the period of 2001 to 2014. This paper also presents a brief analysis technique

introduction to R to build up graphing, simulating and computing skills to enable one to see models in

economics in a unified way. The great advantage of R compiler is that it is free, extremely flexible and

extensible. It uses data that can be downloaded from the internet, and which is also available in different

R packages. This article provides discuses in modeling and forecasting briefly and simply. This paper

provides short details the R command lines and output. This article is written to be useful for learning time

series analysis on basic different levels as well as a research purpose for beginners who beginning the

analysis of time series data in the various scientific and statistical research approaches. ARIMA/GARCH

(1,1) model is applied to observed the forecasting values of low and high stock price (in USD) for GE

company. The results obtained in this paper are based on the work of [10].

In time series are analyzed to understand observation findings from data and the

behavior of the past data points and to random variable. This reason, combined

predict the future values on the basis of with improved computing, technical and

past values, enabling analysis's or statistical ideas, have made time series

decision makers to make properly methods widely applicable in scientific

informed decisions for others. A time and statistical research approach in

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

branches of scientific and statistical published at regular sampling intervals is

research department in private and sometimes referred to as a discrete-time

government sectors, there are variables stochastic process, though the shorter

measured approaches sequentially in name time series model is often

time. Financial/Banking sector record preferred. The theory of stochastic

interest rates as well as exchange rates processes is vast and may be studied

each day. The government statistics without necessarily tting any models

department compute and analyze the over time series data. However, our aim

countrys GDP on a yearly basis and is to more applied and directed towards

other economic data. The weather model tting and forecasting the data

department publishes day to day using R computational techniques.

temperatures and air velocity diagram for The main features of various time series

capital cities and in rural areas from are to detect the trends and seasonal

around the world. Meteorological variations that can be modelled

department record weather parameters at deterministically with respect to

many dierent sites with different mathematical functions of time. But,

instrument such as Weather radar and another important feature of most of the

optical rain gauge meter and etc. When time series is that observations close

such variable is measured sequentially in together in time tend to be correlated.

time over or at a regular interval, known Some of the methodology in a time series

as the sampling interval, the resulting analysis is focused on explaining this

data come from a time series. correlation factor and the main features

Observations that have been collected in the data using appropriate statistical

over regular sampling intervals from a models and descriptive methods. Once an

historical time series. In this paper, we accurate model is observed and tted to

give a basic but useful computational and data values, then researcher used the

statistical approach in which the model to forecast future values, or

historical stock price series are treated as generate simulations, to guide planning

realizations of sequences of random decisions and future prediction. Fitted

variables.

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

models are also used as a basis for price prediction. We begin with some

statistical tests. basic thoughts about how to store and

Finally, a tted statistical model provides process time series data using R

a concise and informative summary of software.

the main characteristics of a time series,

Despite the fact that the auto regressive

which can often be essential for

integrated moving average (ARIMA)

researcher and scientists and financial

technique is powerful and exible also

analysis. Sampling intervals may be

but it is not able to handle the volatility

dier in their relation to the data. The

and nonlinearity that are present in the

data may have been aggregated (for

data series. Some previous studies

example, the number of foreign

showed that generalized autoregressive

passengers reaching per day/month/year)

conditional heteroskedatic (GARCH)

or sampled (as in a daily/weekly/monthly

models are used in time series

basis time series of trade share prices). If

forecasting to handle volatility in the data

data are sampled, the sampling interval

series. [5][6][8].

must be short enough for the time series

to provide a very close approximation to In the next section we will discuss the

the original continuous signal when it is methodology and data preparation. In

interpolated. In a volatile share market, particular, Time series and R analysis

close of historical prices may not suce packages have been discussed in brief

for interactive trading but will usually be in sections 3, we have discussed

adequate to show the nature of trends stationary, non stationary and estimation

and movement of the stock market price of linear trend (GLM) and ACF and

over several years [1] [2] [3] PACF plots respectively in section 4.

The objective of this paper is to provide Then, in section 5, selection of ARIMA

a procedure of modelling and model and in section 6 GARCH (1,1)

forecasting method in terms of have been discussed. In section 7, we

ARIMA/GARCH modelling for have obtained the ARIMA/ GARCH

researchers by means of statistical R (1,1) model performance for GE stock

applications. Furthermore, we have price. Finally, we conclude this paper in

shown how to use R to find these stock section 8.

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

as under the packages ts. we used

IT is assumed that you have installed R

historical stock price data over the

software on your computer/laptop or

period 2001 to 2015 and stored the data

machine, and it is suggested that you

in the .csv le .The function read.csv()

work through the examples, making sure

comes to read data from .csv le which

your output agrees with the results. If

stored on your computer and laptop .

you do not have R, then it can be

Notice that the rst row contains the

installed free of charge from the Internet

names of the columns namely Date, the

site www.r-project.org. It is also

date information is in the rst column

recommended that you have some

with the format dd/mm/YYYY, stock

familiarity with the basics statistical

price in the second column namely close

packages of R, [1].

.The rst step of identication is to check

In this analysis, we used some of the the occurrence of a trend in data series

time series and forecasting packages movement by plotting time series which

such as zoos, xts, ts, astsa, fts, and is as shown in Figure 1 . From the

forcast. For representing irregularly plotting, it can be seen that the data time

spaced time series, the packages series does not vary in a xed level or

timeSeries, zoo and xts are mostly used not which indicates that the series is non

in time series analysis. In these packages, stationary and stationary in both mean

timeSeries objects are the core data and variance, as well as exhibits an

objects. But this timeSeries objects are nature of trends. Time series are shown

not frequently used as zoo and xts in gure 1 as well as figure 2.

objects for representing time series data. General Electric ,GE, is an

A very exible time series class is zeileis American multi national company

ordered observations (zoo) created by incorporated in New York USA. The

Achim Zeileis and Gabor Grothendieck company operates through the following

and available in the package zoo on segments i.e., Power & Water, Oil and

CRAN , [1][10][11][12]. Gas, Aviation, Healthcare, Transportatio

n and Capital which cater to the needs of

In this study, A Regularly spaced time

services, Medical devices, Life

series structure, data are arranged with a

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

oftware widely used packages. Before using

Development and Engineering industries statistical objects in r software, we need

, [1][10][11][12]. (Refer Fig. 1) to install and load the appropriate

statistical and forcasting package (if you

WORKING WITH TIME SERIES have already installed it, you only need

DATA to load it) using the appropriate

The native R classes suitable for storing command, [1][2][3][9].

time series data include vector, matrix ,

data.frame, and ts objects. But the types ESTIMATING A LINEAR TREND

of data that can be stored in these objects Consider the Stock price series is shown

are narrow; furthermore, the methods in Figure 2.The data are mean stock close

provided by these representations are price index from 2001 to 2014. In

limited in research and analysis scope. particular data are deviations , measured

There exist specialized objects that deal in USD. We note that an apparent

with more general representation of time upward trend in the series during this

series data as zoo, xts, or time Series period. A simple kind of generated series

objects, available from packages of the might be a collection of uncorrelated

same name. It is not necessary to create random variables, wt with mean 0 and

time series objects for every time series nite variance 2w. The time series

analysis problem, but more sophisticated generated from uncorrelated variables is

analyses require time series objects. You used as a model for noise in statistical

could calculate the mean or variance of research purpose, where it is called white

time series data represented as a vector in noise; The designation white originates

R, but if you want to perform a seasonal from the analogy with white light and

decomposition using decompose, you indicates that all possible periodic

need to have the data stored in a time oscillations are present with equal

series object. .[1][10][11][12] strength.

In the following examples, we assume Now We express simple linear regression

you are working with zoo,ts to estimate that trend by tting the model

forcast,timeseries ,stats objects and etc. over time series xt = 1 + 2t + wt,t =

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

2001..2014. where 1 and 2 are eliminate a quadratic trend and so on. For

regression coecient wt is random error other information, De-trend, dierence,

or noise . In general, it is necessary for log and dierence of log series of data

time series data to be stationary, so are plotted in gure 3.The dierencing

averaging lagged products over time, as technique is an important component of

in above paragraph. With time series the ARIMA model of Box and Jenkins

data, it is the dependence between the (1970), [14][15] . (Refer Fig. 3)

values of the series that is important to

measure; we must, at least, be able to ACF and PACF plots

estimate autocorrelations with precision.

ACF and PACF are the core of ARIMA

Also, the stock price series shown in

modelling. The box Jenkins method

Figure 2 contains some evidence of a

provides a way to identify an ARIMA

trend over time. The rst step in

model according to autocorrelation and

modelling time index data is to convert

partial autocorrelation graph of the series

the stationary time series. In order to

as shown in gure 4 (panel a, b, c and d).

convert non stationary series to

The parameters of ARIMA consist of

stationary , dierencing method can be

three components, namely

used in which the series is lagged 1 step

Autoregressive parameter (p), Number of

and subtracted from original series.

dierencing (d), and Moving average

(Refer Fig. 2)

parameters (q) In order to to identify

The rst dierence is denoted as xt = xt

ARIMA model we need to follow these

xt1 The rst dierence of data are also

basic steps are mentioned below:

shown in gure 3, produces dierent

result than removing trend by de- Step 1:- If ACF cut o after lag n and

trending via regression. The dierenced PACF dies down, then identify the order

series does not contain the long middle of MA (q) in ARIMA (0, d, q) model

cycle observed in de-trended time series. Step 2:- if ACF dies down and PACF cut

Over dierencing can cause the standard o after lag n then identify AR (p) in

deviation to increase. First dierence is ARIMA (p, d, 0) model

an example of a linear lter to eliminate Step 3:- if ACF and PACF die down

a trend and second dierence can means, then we get mixed ARIMA (p, d,

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

dierencing (d). popularized in the landmark work by

Box and Jenkins (1970), [14] [15].

ACF and PCF are a primary tool for

clarifying the relations that may occur ARIMA MODEL

within and between time series at various

ARIMA is one type of models in the

lags. In the beginning of tting ARIMA

Box-Jenkins model. The Box - Jenkins

model, the idea of model

methodology includes four iterative steps

parameterization as possible yet still be

of model identication, parameter

capable of explaining the series (i.e., p

estimation, diagnostic checking and

and q should be 3 or less, or the total

forecasting. In identication step, data

number of parameters should be less than

transformation is required to make the

3 in view of Box-Jenkins method) based

series stationary. The stationary process

on gure 4. (Refer Fig. 4)

is a foundation in building an ARIMA (p,

The more parameters the greater noise d, q) model. When the observed time

that can be introduced into the model and series presents trends and non seasonal

hence standard deviation. Classical behavior, data transformation and

regression is often insucient for dierencing are applied to the data series

explaining all of the interesting dynamics in order to stabilize variance and to

of a time series. The ACF and PACF of remove the trend before an ARIMA

the residuals of the simple linear model is applied. However, In order to

regression t of the data reveals understand to the brief mechanism of

additional structure in the data that the ARIMA (p, d, q) models are also capable

regression did not capture. Instead, the of modelling a wide range of seasonal

introduction of correlation as a data and non seasonal data. A seasonal

phenomenon that may be generated ARIMA model is formed by including

through lagged linear relations leads to additional seasonal terms in the ARIMA

proposing the autoregressive (AR) model models. In brief, The model is written as

and moving average (MA) models. follows taken from [16]:

Adding non stationary models to the mix

leads to the autoregressive integrated

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

the same as for non-seasonal data,

except that we need to select seasonal

AR and MA terms as well as the non-

seasonal components of the model. In

Where am = number of periods per another way, The R function, auto.

season. We use the uppercase notation Arima function can help to select all

for the seasonal parts of the model, and three parameters, p, d, and q, and

lowercase notation for the non-seasonal predict and forecast function can also

parts of the model, [16]. help in forecasting the future values. It

may be useful to have an automatic

The seasonal part of the model consists

method for selecting an ARIMA model

of terms that are very similar to the non-

parameters and forecasting, [2] [3] [4]

seasonal components of the model, but

[5]. (Refer Fig. 5) In addition to Box-

they involve back shifts of the seasonal

Jenkins method, the autocorrelation

period. For example, an ARIMA (p, d,

function (ACF) and the partial

q) (P, D, Q) 4 model (without a

autocorrelation function (PACF) of the

constant) is for quarterly data (m=4) and

sample stock price data are used to

can be written as [16]

identify the order of ARIMA (p, d, q)

model. The ordered model then is

statistically checked whether it

accurately describes the series or not.

The model ts well if the P-value of its

parameter is statistically signicant, as

Hence , An ARIMA (p, d, q) (P,D,Q) well as its residuals are generally small,

process can be tted to data using the R randomly distributed, and contain no

function Arima with the parameters useful information, where at this point,

order set to c(p, d, q) based on ACF and the model can be used for forecasting.

model, restrict attention to the seasonal identify the ARIMA (p.d, q) model.

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

According to table 1 the p-values for all other words, if the result rejects the

parameters are less than 0.05, indicating hypothesis, this means the data is

that they are statistically significant. In independent and uncorrelated;

addition, p-value of the Box- Ljung test otherwise, there still remains serial

is greater than 0.05, and so we cannot correlation in the series and the model

reject the hypothesis that the needs more modication. The

autocorrelation of residuals is different procedure includes observing residual

from 0. The model thus adequately plot and its ACF and PACF diagram,

represents the residuals. Due to the and check Ljung- Box result. If ACF

scope of this paper, we used the and PACF of the model residuals show

performance GARCH (1,1) with no signicant lags, the selected model is

ARIMA (2,1,2). appropriate, [14] [15]. (Refer Fig. 6)

Using ARIMA(2,1,2) as selected model,

According to this procedure, the model

the mathematical equation for such

with lowest AICc will be selected.

model as follows :

When perform time series analysis in R,

the program will provide AICc as part

of the result. Based on AICc, we should

select manually ARIMA (2,1,2) model.

The significancy of ARIMA residuals

Based on ARIMA (2,1,2), High and

and QQ plot are shown in figure5 and

low price corresponding to month,

figure 6. In figure 6, the red line

indicating with numeric value over the

indicates the fitted line and blue line

line as shown in figure 6a. In the figure,

presents the predicted values for 12

X axis indicates the forecast low price

months ahead. (Refer Table 1)

and y axis presents the predicted high

In addition, the Ljung - Box test also prices corresponding to month

provides a dierent way to double check indicating on a curved line. (Refer Fig.

veries whether the autocorrelations of

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

Although ACF and PACF of residuals distributed, and ACF and PACF of

have no significant lags, the time series squared residuals displays no significant

plot of residuals shows some cluster of lags, [10].

volatility in figure 5. It is important to According to the plots of squared

note that ARIMA is a method to linear residuals are shown in figure 5. The

model the data and the forecast width squared residuals plot shows clusters of

remains constant because the model does volatility at some points in time. ACF

not reflect recent changes or incorporate seems to die down. PACF cuts off after

new information. In other words, it lag 10 even though some remaining lags

provides best linear forecasts for the are significant. The residuals therefore

series, and thus plays little role in show some patterns that might be

forecasting model nonlinearly. In order modeled. ARCH/GARCH (1,1) is

to model volatility, ARCH/GARCH (1,1) necessary to model the volatility of the

method is used. Firstly, check if residual series. As indicated by its name, this

plot (figure 5) displays any cluster of method concerns with the conditional

volatility. Next, observe the squared variance of the series. Followings are the

residual plot (figure 5). If there are based on the plots of squared residuals: .

clusters of volatility, ARCH/GARCH The squared residuals plot shows

(1,1) should be used to model the clusters of volatility at some points in

volatility of the series to reflect most time. ACF seems to die down. PACF

recent changes and fluctuations in the cuts off after lag 10 even though some

series. Finally, ACF and PACF of remaining lags are significant The

squared residuals will help confirm if the residuals therefore show some patterns

residuals are not independent and can be that might be modeled. ARCH/GARCH

predicted. As mentioned earlier, a strict (1,1) is necessary to model the volatility

white noise can- not be predicted either of the series. Noted that we fit

linearly or nonlinearly while the general ARCH/GARCH (1,1) to the residuals

white noise might not be predicted from the ARIMA model selected

linearly yet done so nonlinearly. If the previously, not to the original series or

residuals are strict white noise, they are differences log series because we only

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

want to model the noise of ARIMA figure 6 and 6a. The Log price as well

model. ARIMA 1 year forecasting and as low and high values at the 95 %

QQ plot are shown in figure 6., [5] [6] confidence level are also plotted as

[7] [8]. (Refer Fig. 7 or 7a) shown in figure 7 which gives an

important result with high and low values

Mathematical equation for GARCH(1,1)

for future purpose. The conditional

model is

variances plotted in figure 7, which

ht = 0.0002159 + 0.15535402t-- 1 + 404955595 2t--2 reflects the volatility of the time series

over the entire period from 2001 to 2014.

. High volatility in close price is closely

ARIMA GARCH(1,1)

related to a period where the stock price

PERFORMANCE

tumbled. In order to make the final check

There is two-stage procedure in the

on the model is to provide at Q-Q Plot of

proposed combined model of ARIMA

residuals of ARIMA-ARCH (1,1) model

and GARCH(1,1). In the first stage, the

as shown in figure 7. Q-Q plot is plotted

best of the ARIMA models is used to

directly using the R command to check

modelled the linear data of time series

the normality of the residuals. The plot

and the residual of this linear model will

shows that residuals seem to be roughly

contain only the nonlinear data as shown

normally distributed, although some

in figure 6 and 6a . In the second stage,

points remain off the line. However,

the GARCH(1,1) is used to modelled the

compared to residuals of ARIMA model

nonlinear patterns of the residuals. This

in figure 6, those of mixed model are

combined model which combines an

more normally distributed. [10]

ARIMA model with GARCH(1,1) error

The mathematical equation to complete

components is applied to analyze the

a model of ARIMA (2,1,2) as well as

univariate series and to predict the values

ARCH (1,1) is written below

of approximation series

[9][10][11][12][13]. ( Yt - Yt-1 ) - ht = 0.1390 (Yt-1-Yt-2) +

+0.0002159 + 0.15535402t-- 1 + 404955595 2t--2

model, ARIMA forecast obtained using

R methodology and then add conditional

variance to ARIMA forecast as shown in

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

Note that the R compiler will exclude new data and estimate parameters again

constant when fitting ARIMA for series for forecasting. [10]

needed differencing. [10]

The variance of stock price in ARIMA

It is noted that the 95% confidence

model is unconditional variance and

intervals of ARIMA (2,1,2) are wider

remains constant. ARIMA is applied for

than that of the combined model ARIMA

stationary series and therefore, non-

(2,0,2) ARCH (1,1). ARIMA /GARCH

stationary series should be transformed.

forecasting tells us that the share price

Additionally, ARIMA and GARCH

moves between 22.19 to 34.04USD.

models are often used together, namely

This is because the latter reflects and

ARIMA/GARCH (1,1) model.

incorporate recent changes and volatility

ARCH/GARCH (1,1) is a method to

of stock prices by analyzing the residuals

measure the volatility of the series, or,

and its conditional variances (the

more especially, to model the noise term

variances affected as new information

of ARIMA model. ARCH/GARCH (1,1)

comes in) [10].

incorporates new information and

analyses the series based on conditional

CONCLUSION

variances where users can forecast future

In this work, time domain method is a

values with up-to-date information to

useful technique to analyze the financial

making money. The forecast interval for

time series for predicting the stock price

the mixed model is closer than that of

to making money. There are some basic

ARIMA-only model.

points in forecasting based on combined

ARIM-ARCH/GARCH (1,1) model that ACKNOWLEDGEMENTS

need to take into account. Firstly,

We would like to thank the Dyal Singh

ARIMA (p, d, q) model focused on

College, University of Delhi for

analyzing time series linearly and it does

providing the computational facility

not reflect recent changes as new

during the course of this work.

information is available in the data.

Therefore, in order to more accurate the

model, researches need to incorporate

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

ISBN 978-1-4419-1575-7,2010

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programming: tour of statistical

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ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

LIST OF FIGURES:

>>data <- read.csv("filename.csv")

>>datat_ts <-ts (data$close, start=c(YYYY,MM), end=c(YYYY,MM) ,frequency = N)

>>plot(data_ts, type="l", ylab = "data", xlab = "Time",main ="Time series")

Figure 2: Time series deviations shown with fitted linear trend line

>>plot(data_ts,type="l",ylab = " close price", main="Time Series with trend")

>>newtime<-time(data_ts,start=c(YYYY),end=c(YYYY),frequency=N)

>>fit<-(reg=glm(data_ts ~time(data_ts),na.actio=NULL))

>>abline(fit,col='blue',lty=1:10)

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

Figure 3: De trended (panel a), differenced ( panel b), log series(panel c) and

differenced log series(panel d) shown in figure

>>fit<-(reg=glm(data_ts~time(data_ts),na.actio=NULL))

>>par(mfrow=c(2,2))

>>plot(resid(fit),main="(a) detrended series",ylab="")

>>plot(diff(meandata),type="l",main="(b)differenced series",ylab="")

>>plot(log(meandata),main="(c)log series",ylab="")

>>plot(diff(log(meandata)),main="(d)diff.log series",ylab="")

par(mfrow=c(3,2))

acf(data_ts,main =" (a) ACF original series")

pacf(data_ts,main ="(b)PACF original series",ylab="")

acf(resid(fit),main ="(c) ACF detrended series",ylab="")

pacf(resid(fit),main ="(d) PACF detrended series",ylab="")

acf(diff(data_ts),main="(e) ACF differenced series",ylab="")

pacf(diff(data_ts),main ="(f) PACF differenced series",ylab="")

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

>>fit<-(reg=lm(data_ts~time(data_ts),na.actio=NULL))

>>difff<-diff(log(data_ts))

>>f405 <-Arima(difff,seasonal=list(order=c(2,0,2),period=12),include.drift=FALSE)

>>plot(f202$residuals,lag.max=100,main=" arima residual (a)",ylab="")

>>plot((f202$residual^2),lag.max=100,main="arima Squared Residuals(b)",ylab ="")

>>acf(f202$residuals,lag.max=100,ylim=c(-1,1),main="acf arima residual (c)",ylab="")

>>pacf(f202$residuals,lag.max=100,ylim=c(-1,1),main="pacf arima residual(d)",ylab="")

>>acf((f202$residual^2),lag.max=100,main="acf Squared Residuals(e)",ylim=c(-1,1),ylab="")

>>pacf((f202$residual^2),lag.max=100,main="pacf Squared Residuals (f)",ylim=c(- 1,1),ylab="")

f410<-Arima(logdata,seasonal=list(order=c(2,0,2),period=6),include.drift=F)

par(mfrow=c(1,2))

plot(forecast(f202),main=" forcast model",ylim=c(3.1,3.6))

lines(fitted(f202),col="red")

qq=f202$residuals

qqnorm(qq,main='ARIMA residuals')

qqline(qq)

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

The given R command lines helps to create figure look likes figure 7:

>>par(mfrow=c(2,2))

>>plot(log(data_ts),type='l',main='Data')

>>arima202<-Arima(logdata,seasonal=list(order=c(2,0,2),period=6),include.drift=TRUE)

>>fit202<-fitted.values(arima203)

>>low<-fit202-1.76*sqrt(ht.arch11)

>>high<-fit202+1.76*sqrt(ht.arch11)

>>plot(data_ts,type='l',main='Log price,Low,High')

>>lines(low,col='red')

>>lines(high,col='blue')

>>ht.arch11<-arch11$fit[,1]^2 #use 1st column of fit

>>plot(ht.arch11,main='Conditional variances')

>>archres<-res.f202/sqrt(ht.arch11)

>>qqnorm(archres,main='ARIMA-GARCH Residuals')

>>qqline(archres)

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

The output of Garch(1,1) model as shown in figure7a:

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

LIST OF TABLES:

(Ljung - Box test)

Arima - Arch (00) Not done Not done

(000) 759.48

Arima - Arch (01) -798.0746 0.6248

(101) 757.40

Arima - Arch (02) -797.000 0.9112

(201) 755.75

Arima - Arch (03) -789.859 0.8964

(301) 754.41

Arima - Arch (04) -782.745 0.9118

(102) 756.10

Arima - Arch (05) -776.335 0.8237

(202) 760.85

Arima - Arch (06) -768.186 0.7979

(302) 757.08

Arima - Arch (07) -763.061 0.8378

(103) 754.69

Arima - Arch (08) -755.636 0.8032

(203) 755.23

Arima - Arch (09) -801.266 0.7877

(303) 757.08

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