do you know how to do sign bias test in Python? is there any package that can do that? afaik, in R there is rugarch package, but i’m not familiar with R language
Thank you
I expect to know the package in python that can run sign bias test or maybe the code from scratch
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arch: To conduct the Sign Bias Test we can use the arch package in Python, which is intended for econometric modelling and also includes the functions for most GARCH models as the rugarch package in R does.Explanations regarding the Sign Bias Test can be found in Engle and Ng (1993), where the bias on the sign of the predicted errors is evaluated. First, make sure the arch package is installed. ex:-
Train a GARCH model on it.
pip install arch(this is to install)
import numpy as np
import pandas as pd
from arch import arch_model( this is to import)
model = arch_model(returns, vol='Garch', p=1, q=1)
model_fit = model.fit(disp='off')
residuals = model_fit.resid
def sign_bias_test(residuals):
n = len(residuals)
pos_count = np.sum(residuals > 0)
neg_count = np.sum(residuals < 0)
expected_pos = n / 2
expected_neg = n / 2
# Chi-squared test statistic
chi_squared = ((pos_count - expected_pos) ** 2 / expected_pos) + ((neg_count - expected_neg) ** 2 / expected_neg)
return chi_squared
test_statistic = sign_bias_test(residuals)
print(f'Sign Bias Test Statistic: {test_statistic}')
this is just example you can use it however you want .
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