Question: Suppose rt is such that rt = Bo +80+ + at, at = E10 of = 1+0.5a7_1 Here, {Et}'s are i.i.d. N(0,1) random variables and

Suppose rt is such that rt = Bo +80+ + at, at =

Suppose rt is such that rt = Bo +80+ + at, at = E10 of = 1+0.5a7_1 Here, {Et}'s are i.i.d. N(0,1) random variables and ot is the positive square-root of o. Note the existence of volatility in the mean of rt. Such a model is called GARCH-M (GARCH in the mean). Assume that Bo = 0.06 and 8 = 0.22. What is Ert 07-1 = 0.6)? What is Var(rt at-1 = 0.6)? What is the conditional distribution of rt given at-1 = 0.6? Suppose rt is such that rt = Bo +80+ + at, at = E10 of = 1+0.5a7_1 Here, {Et}'s are i.i.d. N(0,1) random variables and ot is the positive square-root of o. Note the existence of volatility in the mean of rt. Such a model is called GARCH-M (GARCH in the mean). Assume that Bo = 0.06 and 8 = 0.22. What is Ert 07-1 = 0.6)? What is Var(rt at-1 = 0.6)? What is the conditional distribution of rt given at-1 = 0.6

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