The RATS Software Forum

Dear all,

I am currently working on DECO model. I want to investigate which the exogenous variable affects the equicorrelation. Does anyone know how to add an exogenous variable into the 2nd stage of DECO estimation?
For instance, in the file "GARCHDECO.RPF", adding "usxjpn" series into the 2nd stage of the DECO estimation.
I would be most grateful if anyone could help me. Thanks.

What does that even mean? The whole point of the idea is that the correlations are equal. Also, it's not clear whether there are any applications for DECO that can't be handled by a CC model.

Thank you for your reply.
Actually, what I want to do is determining which exogenous variable would affect the equicorrelation.
Let's use the file "GARCHDECO.RPF" as an example. If I want to investigate whether the federal fund rate affect the equicorrelation of those sample currencies. May I know if I can add the federal fund rate into the 2nd stage of DECO estimation?
And how should I do in this case?
Thanks a lot.

Have you found a paper that does that? I can't even imagine what that would mean.

To my knowledge, no paper tried to do this. But it is similar to the papers (eg. Vargas 2008) that include the exogenous variables into the 2nd stage of the DCC model.
What do you think?
Thank you