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Lecture 8: Conditional Heteroscdastic Models

Lecture 8: Conditional Heteroscdastic Models. The following topics will be covered: ARCH GARCH GARCH extensions Alternative Approach developed in French et al (1987). Basic Idea. ARCH. Properties and Weakness of ARCH Model. Procedures in Building an ARCH Model. Example.

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Lecture 8: Conditional Heteroscdastic Models

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  1. Lecture 8: Conditional Heteroscdastic Models • The following topics will be covered: • ARCH • GARCH • GARCH extensions • Alternative Approach developed in French et al (1987) L8: Conditional Volatility Model

  2. Basic Idea L8: Conditional Volatility Model

  3. ARCH L8: Conditional Volatility Model

  4. Properties and Weakness of ARCH Model L8: Conditional Volatility Model

  5. Procedures in Building an ARCH Model L8: Conditional Volatility Model

  6. Example • The monthly log stock returns of Intel Corp (page 90-91) procautoreg data=intl; model lret=/garch=(q=3); output out=a1; run; procautoreg data=intl; model lret=/garch=(q=1); output out=a1; run; L8: Conditional Volatility Model

  7. GARCH L8: Conditional Volatility Model

  8. Example L8: Conditional Volatility Model

  9. IGARCH, GARCH-M, EGARCH L8: Conditional Volatility Model

  10. French, Schwert and Stambaugh (1987)’s Approach L8: Conditional Volatility Model

  11. Example L8: Conditional Volatility Model

  12. Exercises (1) L8: Conditional Volatility Model

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