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Statistics 16 Online
OpenStudy (anonymous):

NEED HELP PLEASE. I will be very appreciate if anyone can help me solve this problem. :) :) :) Consider the following ARCH(1,1)model: yt =μ+at,at ∼N(0,σt2) where σt2 = α0 + α1a2t−1. If yt is a daily stock return series, what range of values are likely for the coefficients μ, α0 and α1? Derive the necessary equations to justify your answers. [Hint: answer the question remembering that the non-stationry case is rare in practice and not often entertained in theory.]

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