advanced-algorithmic-trading

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> getSymbols("^GSPC")
> sp = diff(log(Cl(GSPC)))
Let us perform the same fitting procedure as for the simulated ARMA(3,2) series above on
the log returns series of the S&P500 using the AIC:
> spfinal.aic <- Inf
> spfinal.order <- c(0,0,0)
> for (i in 0:4) for (j in 0:4) {
> spcurrent.aic <- AIC(arima(sp, order=c(i, 0, j)))
> if (spcurrent.aic < spfinal.aic) {
> spfinal.aic <- spcurrent.aic
> spfinal.order <- c(i, 0, j)
> spfinal.arma <- arima(sp, order=spfinal.order)
> }
> }
The best fitting model has order ARMA(3,3):
> spfinal.order
[1] 3 0 3
Let us plot the residuals of the fitted model to the S&P500 log daily returns stream, as given
in Figure 10.24:
> acf(resid(spfinal.arma), na.action=na.omit)
Figure 10.24: Correlogram of the residuals of the best fitting ARMA(p,q) Model, p = 3 and
q = 3, to the S&P500 daily log returns stream