help newsimpact
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News impact curve for ARCH models


Syntax

        newsimpact [, sigma2(a) range(b)]

Description

newsimpact is for use after arch.  It plots the news impact curve, the response
in the conditional variance, sigma^2(t), to an innovation in the standardized
error term, z(t-1).  When calculating the response in sigma^2(t) historical
conditional variances (sigma^2(t-i), i > 0) are set to sigma^2 and historical
error terms (z(t-i), i > 1) are set to 1. The default value for sigma^2 is an
estimate of the unconditional variance, the mean of the estimated conditional
variances. Finally error terms that enter in the conditional variance formula
are obtained as e(t) = sigma*z(t).

Options

    option           Description
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    sigma2(a)        Use sigma^2 = a instead of the default. The default is
                       to set sigma^2 to the mean of the estimated
                       conditional variances.

    range(b)         Plot the news impact for z(t-1) = -b to +b instead of
                       the default z(t-1) = -2 to +2.

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Examples

    Setup
        . webuse wpi1

    Fit GARCH(1,1) and plot news impact curve
        . arch D.ln_wpi, arch(1) garch(1)
        . newsimpact

    Fit EGARCH(1,1) and plot news impact curve (yes, the curve is weird)
        . arch D.ln_wpi, earch(1) egarch(1)
        . newsimpact

Author

    Sune Karlsson, Örebro University, Sweden
    sune.karlsson@oru.se