Question: Simulate an ARCH (4) process with high persistence in variance. Plot the time series and the conditional variances. Plot the histograms of the original time

Simulate an ARCH (4) process with high persistence in variance. Plot the time series and the conditional variances. Plot the histograms of the original time series and of the standardized time series. Comment on their differences. Compute the autocorrelograms of the original time series, the square of the series, the standardized series, and the square of the standardized series. Comment on their differences.

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We have generated 5000 observations of the following ARCH 4 process Which exhibits high persistence because a 1 a 2 a 3 a 4 090 The unconditional mean of the process is 1 and the unconditional varianc... View full answer

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