Generating a Model's Coefficients in Excel


Is there a way to generate the model's coefficients in Excel?


YES, you can use the Solver add-in that ships with Microsoft Excel. If you don't have enabled, go to the Add-Ins manager and enable it.

  1. describe the model you are trying to fit. This is done by guessing the initial coefficients of the model, and compute the log-likelihood (*_LLF()) of the model.
    This figure shows a sample model.
  2. Designate the cell that holds the log-likelihood as the Target cell, set equal to "Max", cells that hold model coefficients as "Changing-cells", and click on "Solve".
    This figure shows the Excel Solver dialog box.
  3. Using *_CHECK (GARCH_CHECK for GARCH model, ARMA_CHECK for ARMA model, etc.), examine the coefficients whether they yield a stable model. Add a constraint to the solver by designating this cell equals to one(1).
    This figure shows the Add Constraint dialog box.
  4. Now, click on the "Solve" button on the Solver dialog box. The Solver will search for a set of optimal coefficients.
  5. Upon completion, the solver will report an optimal solution is found. Click "OK".
    This figure shows the Solver Results dialog box.
  6. In the rare occasions where a solution can't be found, change your initial guess of the coefficients, and try again.


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