Mean model specifications

GARCH Models in Python

Chelsea Yang

Data Science Instructor

Constant mean by default

  • constant mean: generally works well with most financial return data
arch_model(my_data, p = 1, q = 1,
           mean = 'constant', vol = 'GARCH')

GARCH with constant mean assumption

GARCH Models in Python

Zero mean assumption

  • zero mean: use when the mean has been modeled separately
arch_model(my_data, p = 1, q = 1,
           mean = 'zero', vol = 'GARCH')

GARCH with zero mean assumption

GARCH Models in Python

Autoregressive mean

  • AR mean: model the mean as an autoregressive (AR) process
    arch_model(my_data, p = 1, q = 1,
         mean = 'AR', lags = 1, vol = 'GARCH')

GARCH with AR mean assumption

GARCH Models in Python

Let's practice!

GARCH Models in Python

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