14.3 Consider the following T-ARCH model:
h1 = 8+αje2+yd1-1e-1
530
d
=
-{
e, <0
(bad news)
e, ≥0
(good news)
TIME-VARYING VOLATILITY AND ARCH MODELS
(a) If y is zero, what are the values of h, when e,-1=-1, when e1-1 = 0, and when e1-1 = 1?
= 0, and
(b) If y is not zero, what are the values of h, when e-1-1, when e-1 = when e1-1 = 1? What is the key difference between the case y = 0 and y #0?