### Trouble with R squared GARCH(1,1)

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**Thu Aug 08, 2013 3:16 am**Hi all,

Please help me as I got the trouble with R squared when attempting to analysing the daily impact of oil price volatility on the performance of stock market following steps.

Step 1. Collect data of stock and oil price, make the return (ln(Pt+1/Pt)) and add them to Eviews.

Step 2. Group these 2 time series to one spreadsheet and run the quick Estimate equation for ARCH

Step 3. Equation: r_index c r_bre with Student t distribution

Dependent Variable: R_INDEX

Method: ML - ARCH (Marquardt) - Student's t distribution

Date: 08/08/13 Time: 17:05

Sample: 7/31/2000 7/31/2007

Included observations: 1566

Convergence achieved after 18 iterations

Presample variance: backcast (parameter = 0.7)

GARCH = C(3) + C(4)*RESID(-1)^2 + C(5)*GARCH(-1)

Variable Coefficient Std. Error z-Statistic Prob.

C -0.000232 0.000159 -1.456417 0.1453

R_BRE 0.006947 0.007364 0.943421 0.3455

Variance Equation

C 3.97E-06 8.34E-07 4.753775 0.0000

RESID(-1)^2 0.624449 0.067885 9.198588 0.0000

GARCH(-1) 0.531662 0.027272 19.49468 0.0000

T-DIST. DOF 5.977412 0.668936 8.935705 0.0000

R-squared -0.009211 Mean dependent var 0.001409

Adjusted R-squared -0.009857 S.D. dependent var 0.016978

S.E. of regression 0.017062 Akaike info criterion -6.194896

Sum squared resid 0.455283 Schwarz criterion -6.174373

Log likelihood 4856.603 Hannan-Quinn criter. -6.187267

Durbin-Watson stat 1.284358

>>>> However, i got the trouble with R squared NEGATIVE?

Any one could explain what wrong i have done???

Many thx

Please help me as I got the trouble with R squared when attempting to analysing the daily impact of oil price volatility on the performance of stock market following steps.

Step 1. Collect data of stock and oil price, make the return (ln(Pt+1/Pt)) and add them to Eviews.

Step 2. Group these 2 time series to one spreadsheet and run the quick Estimate equation for ARCH

Step 3. Equation: r_index c r_bre with Student t distribution

Dependent Variable: R_INDEX

Method: ML - ARCH (Marquardt) - Student's t distribution

Date: 08/08/13 Time: 17:05

Sample: 7/31/2000 7/31/2007

Included observations: 1566

Convergence achieved after 18 iterations

Presample variance: backcast (parameter = 0.7)

GARCH = C(3) + C(4)*RESID(-1)^2 + C(5)*GARCH(-1)

Variable Coefficient Std. Error z-Statistic Prob.

C -0.000232 0.000159 -1.456417 0.1453

R_BRE 0.006947 0.007364 0.943421 0.3455

Variance Equation

C 3.97E-06 8.34E-07 4.753775 0.0000

RESID(-1)^2 0.624449 0.067885 9.198588 0.0000

GARCH(-1) 0.531662 0.027272 19.49468 0.0000

T-DIST. DOF 5.977412 0.668936 8.935705 0.0000

R-squared -0.009211 Mean dependent var 0.001409

Adjusted R-squared -0.009857 S.D. dependent var 0.016978

S.E. of regression 0.017062 Akaike info criterion -6.194896

Sum squared resid 0.455283 Schwarz criterion -6.174373

Log likelihood 4856.603 Hannan-Quinn criter. -6.187267

Durbin-Watson stat 1.284358

>>>> However, i got the trouble with R squared NEGATIVE?

Any one could explain what wrong i have done???

Many thx