Finding q and q of GARCH model

General
1

Course Name: Financial Time Series Analysis for Trading, Section No: 25, Unit No: 5, Unit type: Quiz

For GARCH model, we need to find optimal p and q.
Shouldn’t we use PACF plot of squared returns to find p (as the MA order) and ACF plot to find q (as the AR order?)

2

Hello Herich,

Thank you for reaching out and for your sharp observation. You are correct; based on the question : How to find optimal lag in GARCH model?, following statements are correct:

B. ACF Plot of squared returns
C. PACF plot of squared returns
D. Test different orders of the model and compare the AIC score

All of the above three are used to find optimal lags of a GARCH model (p,q values)

We will modify the question to remove any inconsistencies.

Thanks again.