We revisit the data analyzed in Example 8.14. As in that example, let rt be the observed return at..

We revisit the data analyzed in Example 8.14. As in that
example, let rt be the observed return at time t. Similarly to that in Example
8.15, the conditional mean of rt is negligible. As an illustration, we fit the
additive model

Don't use plagiarized sources. Get Your Custom Essay on
We revisit the data analyzed in Example 8.14. As in that example, let rt be the observed return at..
Just from $13/Page
Order Essay

                    r2 t = {µ + σ1(r2 t−1) + ···
+ σt−6(r2 t−6)}ε2 t

using the data from January 3, 1990 to December 31, 1999, a
series of length 2529. The fitted functions are depicted in Figure 8.19. The
nonlinearity of fitted functions is very apparent. This suggests that an
ARCH(6) model is inadequate for fitting the volatility function.