In the Sudan, an eight-year-old girl is given by her family to a priest in a neighboring village. She is told to serve him and obey all his wishes. Someone….
explain what would happen to the forecasts in this case.
(g) Suppose now that the researcher had estimated the above GARCH model for a series of returns on a stock index and obtained the following parameter estimates: µˆ = 0.0023, aˆ 0 = 0.0172,
ˆß = 0.9811, ˆa1 = 0.1251. If the researcher has data available up to and including time T , write down a set of equations in s2 t and u2t their lagged values, which could be employed to produce one-, two-,
and three-step-ahead forecasts for the conditional variance of yt .
(h) Suppose now that the coefficient estimate of ˆß for this model is 0.98 instead. By re-considering the forecast expressions you derived in part (g), explain what would happen to the forecasts in this case.