Hello, Samir,
I think it is quite straightforward to
impose exogenous variable into either the mean structure or the conditional
variance equation in GARCH or MGARCH. For your purpose, I believe you need
something like (not tested)
mgarch(formula.mean=rt~1, formula.var= ~typeOFmgarch+optionDummyVariable);
provided your rt and dummy variable have the proper format. If possible, see
the manual for Finmetrics:
Eric Zivot and Jiahua
Wang, 2001, Modeling financial time series with S-plus.
There is a similar example in pp.498-499.
HTH,
Yingfu
-----Original Message-----
From: Samir Saadi
[mailto:Saadi@management.uottawa.ca]
Sent: den 7 juni 2005 16:04
To: Yingfu Xie;
s-news@lists.biostat.wustl.edu
Subject: RE: [S] Comparing
volatility
Thank you Mark and Yingfu for your
help:
Here what I am trying to do
1- Run the returns series as a random walk with drift
: rt = constant + error
2- take the error series and model it with a GARCH
type model while introducing the option dummy variables in the conditional
variance equation)
3- The sign of the dummy vairables will show whether
volatility is lower when a stock has an option
How can I make S-Plus introduce the
second column as a dummy variable in the conditon variance equation?
By the way my file has two colums:
Column
1: Monday returns of thousands of different stocks
Column
2: Dummy variable: 0 for stocks with option and 1 for stocks without option
Thanks everyone for your time
Samir
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