Consider the following T-ARCH model: [begin{aligned}& h_{t}=delta+alpha_{1} e_{t-1}^{2}+gamma d_{t-1} e_{t-1}^{2} & d_{t}=left{begin{array}{lll}1 & e_{t} <0 & text
Question:
Consider the following T-ARCH model:
\[\begin{aligned}& h_{t}=\delta+\alpha_{1} e_{t-1}^{2}+\gamma d_{t-1} e_{t-1}^{2} \\& d_{t}=\left\{\begin{array}{lll}1 & e_{t}<0 & \text { (bad news) } \\0 & e_{t} \geq 0 & \text { (good news) }\end{array}\right.\end{aligned}\]
a. If \(\gamma\) is zero, what are the values of \(h_{t}\) when \(e_{t-1}=-1\), when \(e_{t-1}=0\), and when \(e_{t-1}=1\) ?
b. If \(\gamma\) is not zero, what are the values of \(h_{t}\) when \(e_{t-1}=-1\), when \(e_{t-1}=0\), and when \(e_{t-1}=1\) ? What is the key difference between the case \(\gamma=0\) and \(\gamma eq 0\) ?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Principles Of Econometrics
ISBN: 9781118452271
5th Edition
Authors: R Carter Hill, William E Griffiths, Guay C Lim
Question Posted: