SHAZAM Questions and Answers (Q&A) - RSS feedhttp://community.econometrics.com/questions/SHAZAM Econometrics, Statistics and Analytics Communityen<font color="white">Copyright <b>SHAZAM Analytics, 2018</b></font>Tue, 30 Dec 2014 10:20:13 +0000Arch modelhttp://community.econometrics.com/question/495/arch-model/Dear friends,
I want to estimate a model where I have a mean equation of:
Investment = α + βY +µR +ϴD+ ϵ
Where alpha is an intercept, Y is production, R is the interest rate and D is a dummy variable for risk?
I do not know if it is possible/allowed to model the volatility of investment in this way?
And I do not know what my variance equation will be. Is it just:
Vt= α + Rt-1(squared)
Where Rt-1(squared) is my residuals from the mean equation in t-1 squared?
I will be very greatful for all insight:)Mon, 14 Apr 2014 13:39:38 +0000http://community.econometrics.com/question/495/arch-model/Answer by Pantera for <p>Dear friends,</p>
<p>I want to estimate a model where I have a mean equation of:</p>
<p>Investment = α + βY +µR +ϴD+ ϵ</p>
<p>Where alpha is an intercept, Y is production, R is the interest rate and D is a dummy variable for risk?</p>
<p>I do not know if it is possible/allowed to model the volatility of investment in this way?</p>
<p>And I do not know what my variance equation will be. Is it just:</p>
<p>Vt= α + Rt-1(squared)</p>
<p>Where Rt-1(squared) is my residuals from the mean equation in t-1 squared? </p>
<p>I will be very greatful for all insight:)</p>
http://community.econometrics.com/question/495/arch-model/?answer=585#post-id-585Hi! I don't know what you mean by using a dummy variable for risk. If you plan to estimate an ARCH-model, you should start by analyzing whether the residual in the mean function has conditional heteroscedasticity. Square the residuals and use the sample auto and sample partial autocorrelationfunction for diagnostics.
Tue, 30 Dec 2014 10:20:13 +0000http://community.econometrics.com/question/495/arch-model/?answer=585#post-id-585