The ARCH/GARCH(Univariate) operation on the Statistics menu estimates univariate ARCH and GARCH models. The Wizard will generate the appropriate GARCH instruction based on the information you enter. Note that the GARCH command offers several additional options not available using the Wizard such as the EQUATION option for inputting the form of the "mean model".


Selecting the Wizard brings up the following dialog box:




Header Fields

Dependent Variable

Use this drop down to select the dependent variable for your model.


Sample Start and End

Use these fields to set a specific starting and/or ending date for the estimation. If you leave these blank, it will use the maximum range available.


GARCH Model Tab

Lagged u^2 (q)

Lagged Variance (p) Terms

Use these fields to specify the order of the ARCH(q) or GARCH(p,q) model, by entering the number of lags of the squared residuals (Q) and variances (P).


I-GARCH

For certain models, you can use this field to select an I-GARCH. Your choices are No, With Drift and Without Drift.


Model Type

The choices are Simple for a standard ARCH/GARCH, E-GARCH with asymmetry or E-GARCH w/o asymmetry.


Asymmetric Effects

Select this checkbox to add asymmetric effects.


Distribution/Shape

Choose the conditional distribution for the residuals. The choices are Normal, Student t, and GED. If you choose Student t or GED, the Shape Box is added to the dialog


Mean Model Tab


Mean Model Variables(s)

Use this field to choose the variables in the "mean model" for the equation. By default, this is just the CONSTANT. If you want to estimate a model with a forced zero mean, just erase the content of the text box. For a different set, you can either type in a list of explanatory variables in Regression Format, separating variables with at least one blank space, or click on the series list button recursiv.jpg to select from a list of the series available in memory with a Select Regressors dialog box.


Variance Shifts Tab

Variance Shift Variable(s)

Use this field to add exogenous variables to the variance equation. You can either type in a list of explanatory variables in Regression Format, separating variables with at least one blank space, or click on the series list button recursiv.jpg to select from a list of the series available in memory with a Select Regressors dialog box.


Estimation Tab



Estimation Method,Iterations

(Preliminary) Estimation Methods,Iterations

Use the Estimation Method fields to select the main estimation method that will be used and the maximum number of iterations that will be performed (200 is the default for GARCH). Use the corresponding (Preliminary) Estimation Method fields if you want RATS to use a different estimation method for a specified number of iterations to refine the initial parameter values, before switching to the main estimation routine. A common choice would be to use 5 or 10 iterations of Simplex as a preliminary estimation method.


Robust (HAC) Standard Errors

Lags/Bandwidth

Lag Window Type

These correspond to the ROBUSTERRORS, LAGS, and LWINDOW options. See Robust Error Calculations for details.


Output Tab


Residuals To

Variances To

You can use these field to save, respectively, the estimated residuals and variances. You can either use the drop down to choose an already existing series, or type a new name directly into the text box.


Show Standard Output

Clear this checkbox if you want to suppress the output from the regression (this adds a NOPRINT option to the estimation instruction).


Show VCV of Coefficients

Select this to display the estimated variance/covariance matrix of the coefficients (adds a VCV option).


Related Topics:
GARCH Instruction