The data, FTSE 100 daily return
The mean model used is ARMA(1, 1)
The variance model
The results from a GARCH(1, 1) model in Rugarch
The parameters explained in terms of the model presented above
Interpretation of the parameters
Omega is the interceipt of the variance regressoin and represents the constant level of volatility. Aplha1 is the GARCH reacton parameters and is usually about 0.1. Alpha1 of 0.09 in the specified model is therefore quite high. Beta1 is the persistance parameter of the model and it typically ranges between 0.85 and 0.98. 0.89 is in that range.Plot of sigma
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