New answers tagged

2

An external regressor in the mean specification can be added to the mean specification, i.e. $$r_t = \mu + \varepsilon_t + \theta x_t $$. An external regressor in the variance specification can be added to the variance specification, i.e. $$\sigma^2_t = \omega + \alpha \sigma_{t-1}^2 + \beta \varepsilon_{t-1}^2 + \theta x_{t}$$


Top 50 recent answers are included