2
$\begingroup$

I am a bit confused about the formulation of the EGARCH(1,1) model.
First, we have the error term: $\epsilon_t=\sigma_t*\zeta_t$, where $\zeta_t$ is white noise.

Now the EGARCH(1,1) should be:
$$ log(\sigma_t^2)=w+\alpha_1*log(\sigma_{(t-1)}^2)+g(\zeta_t) $$ but instead I always see $g(\epsilon_t)$.
does anyone know why?

Thank you

Improve this question
$\endgroup$
5
  • $\begingroup$ If you use latex then it works better if you add the $$ signs ;) $\endgroup$
    – Richi Wa
    Jun 8, 2015 at 6:52
  • $\begingroup$ Yeh thanks. any idea about my question? $\endgroup$
    – user3384794
    Jun 8, 2015 at 8:58
  • $\begingroup$ Good point, I will answer $\endgroup$
    – Richi Wa
    Jun 8, 2015 at 9:02
  • $\begingroup$ You need a $\log$ on the lhs of the equation. $\endgroup$
    – Richi Wa
    Jun 8, 2015 at 9:03
  • $\begingroup$ Yes of course, I must have missed it out $\endgroup$
    – user3384794
    Jun 8, 2015 at 9:25

1 Answer 1

Reset to default
2
$\begingroup$

Just a quick fix. Looking at the wikipedia entry of EGARCH: $g(\zeta_t)$ (the unit-scale random variable) seems correct - as you say.

Improve this answer
$\endgroup$
2
  • $\begingroup$ Yes but then everybody writes $g(\epsilon_t)$, not sure why $\endgroup$
    – user3384794
    Jun 8, 2015 at 9:26
  • $\begingroup$ Could you post a link to a reference? $\endgroup$
    – Richi Wa
    Jun 8, 2015 at 9:29

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.