## VAR-GARCH-M

Discussions of ARCH, GARCH, and related models

### Re: VAR-GARCH-M

Thanks a lot
Last edited by economics2012 on Wed Jun 13, 2012 12:51 pm, edited 1 time in total.
economics2012

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Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

VARLAGSELECT is used the the VARLAG.RPF example in the User's Guide. It's also used in quite a few textbook examples, such as endersp344.rpf in the Enders' book.
TomDoan

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### Re: VAR-GARCH-M

Thanks a lot Tom. I will check the User's Guide.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

Hi Tom,

I am running the IRFs for the GARCH(2,1) model with 7lags and I just want to make sure the line below is correct:

compute hirf(i+1)=garchp(1)(4)*hirf(i)+garchp(1)(3)*hirf(i)+garchp(1)(2)*%if(i==1,eps0(1)^2,hirf(i))

This is the code:

Thanks a lot
Last edited by economics2012 on Fri Jun 22, 2012 10:15 pm, edited 1 time in total.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

No. It's not allowing for the second lag on the H. The recursion changes to:

compute hirf(i+1)=garchp(1)(4)*hirf(i)+garchp(1)(3)*hirf(i)+garchp(1)(4)*%if(i==1,0.0,hirf(i-1))+garchp(1)(2)*%if(i==1,eps0(1)^2,hirf(i))
TomDoan

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Joined: Wed Nov 01, 2006 5:36 pm

### Re: VAR-GARCH-M

Thanks a lot Tom.
Last edited by economics2012 on Wed Jul 04, 2012 5:31 am, edited 1 time in total.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

Take out the colored part of this.

compute hirf(i+1)=garchp(1)(4)*hirf(i)+garchp(1)(3)*hirf(i)+garchp(1)(4)*%if(i==1,0.0,hirf(i-1))+garchp(1)(2)*%if(i==1,eps0(1)^2,hirf(i))
TomDoan

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Joined: Wed Nov 01, 2006 5:36 pm

### Re: VAR-GARCH-M

Thanks a lot, Tom.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

Hi,

I am trying to check for the effect of uncertainty in oil price on stock returns for periods t and (t-1), and I need to get psi1 and psi2 of equation one in the attached below model.

Your help is highly appreciated in this regard.
Last edited by economics2012 on Tue Apr 23, 2013 1:44 pm, edited 2 times in total.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

Isn't the only change to add the lag of sqrthoil to the model?
TomDoan

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Joined: Wed Nov 01, 2006 5:36 pm

### Re: VAR-GARCH-M

Correct, but I am not sure how to add the lag of sqrthoil to the model.

Thanks a lot
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

Add sqrthoil{1} to the DET variables in the VAR.
TomDoan

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Joined: Wed Nov 01, 2006 5:36 pm

### Re: VAR-GARCH-M

That's what I got. So, in this case the coefficients of interest psi1 and psi2 would be at the rows of BVEC(2)(9) and BVEC(2)(10) in the table below. Am I correct?

MAXIMIZE - Estimation by BFGS
Convergence in 84 Iterations. Final criterion was 0.0000017 <= 0.0000100
Daily(5) Data From 1986:01:09 To 2011:01:17
Usable Observations 6528
Function Value -23249.1656

Variable Coeff Std Error T-Stat Signif
************************************************************************************
1. B 0.003630837 0.004597287 0.78978 0.42965732
2. BVEC(1)(1) -0.020919103 0.013770255 -1.51915 0.12872437
3. BVEC(1)(2) -0.017907548 0.012138448 -1.47527 0.14013865
4. BVEC(1)(3) -0.025910185 0.013745882 -1.88494 0.05943772
5. BVEC(1)(4) 0.007095474 0.012098455 0.58648 0.55755455
6. BVEC(1)(5) 0.063694484 0.024966843 2.55116 0.01073641
7. BVEC(1)(6) 0.014516131 0.024590681 0.59031 0.55498267
8. BVEC(1)(7) -0.036974500 0.025254800 -1.46406 0.14317801
9. BVEC(1)(8) 0.003019756 0.023903111 0.12633 0.89946818
10. BVEC(1)(9) 0.000000000 0.000000000 0.00000 0.00000000
11. BVEC(1)(10) 0.029592218 0.038326175 0.77212 0.44004626
12. BVEC(1)(11) 0.020315489 0.088257235 0.23018 0.81794804
13. BVEC(1)(12) -0.100079017 0.078496639 -1.27495 0.20232817
14. BVEC(1)(13) -0.141430524 0.077981798 -1.81364 0.06973393
15. BVEC(1)(14) -0.003669281 0.076028871 -0.04826 0.96150770
16. BVEC(1)(15) 0.038306144 0.075008939 0.51069 0.60956974
17. BVEC(2)(1) 0.006861037 0.004349207 1.57754 0.11467190
18. BVEC(2)(2) 0.007140608 0.004188480 1.70482 0.08822779
19. BVEC(2)(3) -0.004294816 0.004409748 -0.97394 0.33008788
20. BVEC(2)(4) 0.001839274 0.004434995 0.41472 0.67834812
21. BVEC(2)(5) 0.050503683 0.013119201 3.84960 0.00011831
22. BVEC(2)(6) -0.018058224 0.012736882 -1.41779 0.15625208
23. BVEC(2)(7) -0.012341526 0.011994855 -1.02890 0.30352589
24. BVEC(2)(8) -0.029380022 0.009576370 -3.06797 0.00215518
25. BVEC(2)(9) 0.021714205 0.041558544 0.52250 0.60132450
26. BVEC(2)(10) 0.002524704 0.041359670 0.06104 0.95132524
27. BVEC(2)(11) 0.001704973 0.032186997 0.05297 0.95775512
28. BVEC(2)(12) -0.009456320 0.031045255 -0.30460 0.76067241
29. BVEC(2)(13) -0.017574618 0.030996118 -0.56699 0.57071814
30. BVEC(2)(14) 0.049693056 0.029394079 1.69058 0.09091696
31. BVEC(2)(15) -0.014526644 0.031511180 -0.46100 0.64479883
32. GARCHP(1)(1) 0.051517641 0.133695987 0.38533 0.69998980
33. GARCHP(1)(2) 0.387974507 0.202605512 1.91493 0.05550198
34. GARCHP(1)(3) -0.243766062 0.201661005 -1.20879 0.22674305
35. GARCHP(1)(4) 0.161764154 0.218537300 0.74021 0.45917075
36. GARCHP(1)(5) 0.015478597 0.236621772 0.06541 0.94784364
37. GARCHP(1)(6) 0.111068501 0.009412590 11.79999 0.00000000
38. GARCHP(1)(7) 0.878391771 0.009982869 87.98991 0.00000000
39. GARCHP(2)(1) 0.024217630 0.020492641 1.18177 0.23729617
40. GARCHP(2)(2) -0.052225550 0.029919436 -1.74554 0.08089105
41. GARCHP(2)(3) -0.010998038 0.035513138 -0.30969 0.75679727
42. GARCHP(2)(4) -0.066363255 0.025568311 -2.59553 0.00944458
43. GARCHP(2)(5) 0.088805125 0.035853755 2.47687 0.01325398
44. GARCHP(2)(6) 0.097831238 0.007462646 13.10946 0.00000000
45. GARCHP(2)(7) 0.890261638 0.008112625 109.73780 0.00000000

should I also set sqrthoil{1}=0 ?

Thanks a lot for all the help.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

### Re: VAR-GARCH-M

That's correct. To peg both sqrthoil parameters in the oil equation you would do:

nonlin b bvec garchp bvec(1)(9)=0.0 bvec(1)(10)=0.0
TomDoan

Posts: 2761
Joined: Wed Nov 01, 2006 5:36 pm

### Re: VAR-GARCH-M

Thanks a lot for all the help.
economics2012

Posts: 62
Joined: Thu Jan 19, 2012 5:41 pm

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