1. Applied Econometric Time Series Third Edition
Walter Enders, University of Alabama
Copyright © 2010 John Wiley & Sons, Inc.

2. Chapter 3 MODELING VOLATILITY

3. 1. ECONOMIC TIME SERIES: THE STYLIZED FACTS

10. 2. ARCH PROCESSES
ARCH Processes
The GARCH Model

12. 3. ARCH AND GARCH ESTIMATES OF INFLATION
Engle’s Model of U.K. Inflation
Bollerslev’s Estimates of U.S. Inflation

13. 4. TWO EXAMPLES OF GARCH MODELS
Volatility Moderation
A GARCH Model of the Spread
Formal Tests for ARCH Errors
Alternative Estimates of the Model

15. 5. A GARCH MODEL OF RISK

16. 6. THE ARCH-M MODEL
Implementation

18. 7. ADDITIONAL PROPERTIES OF GARCH PROCESSES
Properties of GARCH(1, 1) Error Processes
Assessing the Fit
Diagnostic Checks for Model Adequacy
Forecasting the Conditional Variance

20. 8. MAXIMUM-LIKELIHOOD ESTIMATION OF GARCH MODELS

21. 9. OTHER MODELS OF CONDITIONAL VARIANCE
The IGARCH Model
Models with Explanatory Variables
Models with Asymmetry: TARCH and EGARCH
Testing for Leverage Effects
Nonnormal Errors

24. 10. ESTIMATING THE NYSE INTERNATIONAL 100 INDEX
The Model of the Mean
Testing for GARCH Errors
Alternative Estimates of the Model
Diagnostic Checking
The Asymmetric Models

28. 11. MULTIVARIATE GARCH
Updating the Study

31. 12. SUMMARY AND CONCLUSIONS

33. APPENDIX 3.1: MULTIVARIATE GARCH MODELS
The Log-Likelihood Function
Multivariate GARCH Specifications