a. Suppose that E(ut|ut-1, ut-2,...) = 0, that var(ut|ut-1, ut-2,...) follows the ARCH(l) model and that the
Question:
-1.png){kind=small}
and that the process for ut is stationary. Show that var(ut) = α0/(1 - α1).
b. Extend the result in (a) to the ARCH(p) model.
c. Show that
-2.png){kind=small}
for a stationary ARCH(p) model.
d. Extend the result in (a) to the GARCH(1,1) model.
e. Show that α1 + ϕ1
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a From the law of iterated expectations where the last l...View the full answer
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Related Book For 
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
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