GARCH(1,1) with constraints

sunflowerhx · July 28th, 2005, 10:27 am

Hi,I am using Eviews to estimate a GARCH(1,1) with an additonal exogenous variable in the variance eqn.sigma(t)^2 = w+alpha*resid(t-1)^2+beta*sigma(t-1)^2 + gamma*new_variable.I want to perform a likelihood ratio test of the above against the same model with the constraints alpha=beta=0iesigma(t)^2 = w+ gamma*new_variable.However, Eviews does not allow me to set both alpha & beta to zero, only one or the other.Can anyone recommend another package or work around this.Rgds

Rez · July 28th, 2005, 10:56 am

Matlab, RATS

meteor · July 28th, 2005, 12:33 pm

Splus

sunflowerhx · July 29th, 2005, 3:44 pm

Rez,Manage to have a look at Matlab + Garch Toolbox.How do you add an extra variable to the conditional variance eqn?Thanks

quantstudent19 · July 31st, 2005, 1:56 pm

SAS is quite flexible wrt garch modelsgoogle the program for the egarch model and replace the asymetry term by your new variable

buckeye · August 9th, 2005, 1:07 pm

Sunflowerhx or any of the GARCH gurus,You mentioned that you have added an additional exogenous variable to the variance equation using Eviews. Can you please tell me how you added that variable (either in Eviews, R, or Matlab).Thanks a lot.

gregh · August 9th, 2005, 6:42 pm

I would suggest you look at R. It gave me some flaxibility in estimationg garches.best regards

buckeye · August 9th, 2005, 10:11 pm

I did take a look in R earlier before I posted on this list. Maybe I am missing something. Can anyone guide me on this (either in R or EViews).Thanks.

sunflowerhx · August 11th, 2005, 7:08 pm

In Eviews, simply add the exogenous variable(s) in the Variance Regressors box, in the Equation Estimation dialog box.You can also do this in S-Plus which I have started using. But coming back to my original problem when i try to fit a garch(0,0)model with the exogenous variable usng the command below, I get a "Trivial model specified" error message. BP.Garch = garch(BP.ts~1, formula.var=~garch(0,0)+BP.ev)Can anyone help??Regards