MV-EGARCH with spillovers

[TomDoan]

The asymptotic standard error for a correlation (under the null that the correlation is zero) is 1/sqrt(# of observations). So the t-statistics can be computed with:

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cmom(corr)
# variables
compute %cmom=%cmom*sqrt(%nobs)
*
disp %cmom

[gorgorm]

Tom,
Thanks for the quick reply.
After running the code, I got an estimate.
I want to know whether the estimate as per code is the standard errors OR
the square root of the number of observation which I should use to calculate the t-stats.

Thanks

[TomDoan]

That produces the t-statistics. The diagonal elements are nonsense, of course, but all the off-diagonals are the asymptotic t-statistics.

[turkhanali]

Dear Friends,

I have tried to estimate the restricted model as done by Koutmos (1996) Table 2. It does not give same results. Is there any simple way to modify the full-model code to become the restricted model. I have tried to put A(1)(3)==A(2)(3)==A(3)(3)==0.0 immediately after " nonlin b a g d rr " but it does not work.

and How to automatically calculate the impact of symmetric Innovations on volatility using RATS as shown in Table 4. Thanks.

[ibrahim]

Hi Tom,
I tried to adjust your four variable code to a bivariate system. And just changed the below codes as seen. After I run the code, I have the below results. Is something wrong here? I am confused about the results.

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compute n=2
*
* Define the return series
*
dec vect[series] r(n)
compute start=1, end=750
set r(1) = 100*log(fra/fra{1})
set r(2) = 100*log(ger/ger{1})
*
* Template for mean equation. This is a VAR(1)
*
equation meaneq *
# constant r(1){1} r(2){1}

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    Variable                        Coeff      Std Error      T-Stat      Signif
************************************************************************************
1.  B(1)(1)                       0.049233484  0.031080586      1.58406  0.11318028
2.  B(1)(2)                      -0.029537994  0.038492409     -0.76737  0.44286042
3.  B(1)(3)                       0.003853134  0.035468663      0.10863  0.91349209
4.  B(1)(4)                      -0.011483730  0.020734891     -0.55384  0.57969104
5.  B(1)(5)                      -0.014403906  0.021419092     -0.67248  0.50127830
6.  B(2)(1)                       0.069453165  0.051687750      1.34371  0.17904332
7.  B(2)(2)                       0.168135839  0.047800982      3.51741  0.00043577
8.  B(2)(3)                       0.023231342  0.053341768      0.43552  0.66318590
9.  B(2)(4)                      -0.015210762  0.037747528     -0.40296  0.68697730
10. B(2)(5)                      -0.010654883  0.035051930     -0.30397  0.76114754
11. A(1)(1)                       0.002922546  0.008504550      0.34365  0.73111326
12. A(1)(2)                       0.146621640  0.034872157      4.20455  0.00002616
13. A(1)(3)                      -0.009506499  0.023067570     -0.41212  0.68025492
14. A(2)(1)                       0.037589459  0.016418051      2.28952  0.02204915
15. A(2)(2)                       0.033118479  0.015117959      2.19067  0.02847558
16. A(2)(3)                       0.103180374  0.038044773      2.71208  0.00668630
17. D(1)                         -1.332757517  0.398151163     -3.34737  0.00081584
18. D(2)                         -0.541204025  0.302098755     -1.79148  0.07321622
19. G(1)                          0.947575690  0.009841957     96.27919  0.00000000
20. G(2)                          0.952638476  0.019601947     48.59918  0.00000000
21. RR(1,1)                       0.362829658  0.028700696     12.64184  0.00000000

Thanks,
Ibrahim

[ibrahim]

Tom,
Please ignore the results at my last post. I solved the results error and got new results as seen below for a bivariate egarch model.
For this model, "B" coefficients reflect return spillover and "A" coefficients reflect volatility spillover, right!
And B(1)(2) means own lagged retuns effect and B(1)(3) means the other variables' lagged return effect, right!
I am confused about interpreting the results!
Could you please help me?
Thank you very much.

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MAXIMIZE - Estimation by BFGS
Convergence in    27 Iterations. Final criterion was  0.0000095 <=  0.0000100
Usable Observations                       746
Function Value                     -2340.3786

    Variable                        Coeff      Std Error      T-Stat      Signif
************************************************************************************
1.  B(1)(1)                       0.043866259  0.030047126      1.45992  0.14431336
2.  B(1)(2)                      -0.028237331  0.032342501     -0.87307  0.38262384
3.  B(1)(3)                      -0.009105750  0.019289191     -0.47206  0.63688047
4.  B(2)(1)                       0.068639510  0.052417456      1.30948  0.19037245
5.  B(2)(2)                       0.166320047  0.038417338      4.32930  0.00001496
6.  B(2)(3)                      -0.012156675  0.013639290     -0.89130  0.37276922
7.  A(1)(1)                       0.003478053  0.009199481      0.37807  0.70537816
8.  A(1)(2)                       0.143448536  0.036151163      3.96802  0.00007247
9.  A(1)(3)                      -0.006822461  0.024400134     -0.27961  0.77977863
10. A(2)(1)                       0.037727871  0.015439911      2.44353  0.01454440
11. A(2)(2)                       0.032639706  0.015393948      2.12029  0.03398120
12. A(2)(3)                       0.103701708  0.037852261      2.73964  0.00615058
13. D(1)                         -1.375944773  0.412245282     -3.33768  0.00084480
14. D(2)                         -0.538287971  0.352336195     -1.52777  0.12657014
15. G(1)                          0.947938662  0.011011507     86.08619  0.00000000
16. G(2)                          0.952677816  0.018517041     51.44871  0.00000000
17. RR(1,1)                       0.362829054  0.040470315      8.96531  0.00000000

[TomDoan]

Tom,
Please ignore the results at my last post. I solved the results error and got new results as seen below for a bivariate egarch model.
For this model, "B" coefficients reflect return spillover and "A" coefficients reflect volatility spillover, right!
And B(1)(2) means own lagged retuns effect and B(1)(3) means the other variables' lagged return effect, right!
I am confused about interpreting the results!
Could you please help me?
Thank you very much.

The B's are the mean model coefficients. As it's written, B(x)(1) is the intercept. B(x)(2) is the coefficient on the lag of the 1st variable and B(x)(3) is on the second, so B(1)(3) is the spillover in the first equation and B(2)(2) is the spillover in the second.

The A's have a similar pattern--A(x)(1) is the intercept, ...

[ibrahim]

Thank you so much Tom,
I really appreciate your help.

One more question about bivariate VAR(1) EGARCH results. After checking diagnostic tests, LBQ for u(1) is insignificant but LB-Q for u(2) is significant. Although I specified different VAR models, diagnostis test has never changed. Actually, I don't know what to do?

Thank you very much.
Ibrahim

[TomDoan]

Thank you so much Tom,
I really appreciate your help.

One more question about bivariate VAR(1) EGARCH results. After checking diagnostic tests, LBQ for u(1) is insignificant but LB-Q for u(2) is significant. Although I specified different VAR models, diagnostis test has never changed. Actually, I don't know what to do?

Thank you very much.
Ibrahim

I'm not sure what you mean by "I specified different VAR models". Did you increase the number of lags? That would be the only thing likely to fix the Q statistic. And how significant is it?

[ibrahim]

Hi Tom,
I applied Prof. Koutmos' VAR-EGARCH code to his study sample and I am able to verify his results. But I couldn't run diagnostic tests for this VAR-EGARCH model.
Could you help me about that, please?

Best,

[TomDoan]

What do you mean by "couldn't run diagnostic tests"? What happened when you did?

[ibrahim]

Actually, I am new to VAR-EGARCH model.
I searched the manual and also the forum, but didn't get any diagnostic code for VAR-EGARCH..
I am just trying to get the same results as in Prof. Koutmos's study.
Could you help me, please?

Thank you..

[TomDoan]

Those are just typical diagnostics on the (individually) standardized residuals.

[ibrahim]

I applied the following code for std residuals after estimating Koutmos VAR-EGARCH code, but it gives the below error...

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set z1 %regstart() %regend() = rd(t)(1)/sqrt(hh(t)(1,1))
set z2 %regstart() %regend() = rd(t)(2)/sqrt(hh(t)(2,2))
set z3 %regstart() %regend() = rd(t)(3)/sqrt(hh(t)(3,3))
set z4 %regstart() %regend() = rd(t)(4)/sqrt(hh(t)(4,4))
## MAT15. Subscripts Too Large or Non-Positive
Error was evaluating entry 15

[TomDoan]

I'm not sure where RD is even being defined, but what you want for this coding is:

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set z1 %regstart() %regend() = u(1)/sqrt(hh(t)(1,1))
set z2 %regstart() %regend() = u(2)/sqrt(hh(t)(2,2))
set z3 %regstart() %regend() = u(3)/sqrt(hh(t)(3,3))
set z4 %regstart() %regend() = u(4)/sqrt(hh(t)(4,4))