## Another Generating Garch Data Question

Discussions of ARCH, GARCH, and related models

### Another Generating Garch Data Question

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Last edited by elizamcginley on Tue Mar 20, 2012 8:08 pm, edited 2 times in total.
elizamcginley

Posts: 3
Joined: Mon Mar 05, 2012 7:11 am

### Re: Another Generating Garch Data Question

Yes, it would be helpful to have the formulas that you're trying to use.
TomDoan

Posts: 2724
Joined: Wed Nov 01, 2006 5:36 pm

### Re: Another Generating Garch Data Question

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Last edited by elizamcginley on Tue Mar 20, 2012 8:09 pm, edited 1 time in total.
elizamcginley

Posts: 3
Joined: Mon Mar 05, 2012 7:11 am

### Re: Another Generating Garch Data Question

The U(1) and U(2) are the shocks and the H are the variances. If you want to define a simple bivariate GARCH-M process from that, you could do something like

set x = 5+.3*h(t)(1,1)+u(1)
set y = 3+.1*h(t)(2,2)+u(2)

The +u(1) and +u(2) are the only parts that a "required" for making this a bivariate GARCH model. The other terms are for the mean model that you want. The matrix h(t) is a 2 x 2 array with the variances in the (1,1) and (2,2) slots and the covariance in (1,2). So x includes the variance of process 1 and y includes the variance of process 2 in the mean.
TomDoan

Posts: 2724
Joined: Wed Nov 01, 2006 5:36 pm