{smcl} {* *! version 1.1 2019-03-27}{...} {cmd:help newsimpact} {hline} {title:News impact curve for ARCH models} {title:Syntax} {p 8 25 2} {cmd:newsimpact [response news]} [{cmd:,} {opt s:igma2(a)} {opt r:ange(b)} {opt nog:raph}] {title:Description} {p}{cmd:newsimpact} is for use after {cmd: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). {p}Optionally saves the variables for the x axis (news) and y axis (response) of the graph. {title:Options} {synoptset 15}{...} {synopthdr:option} {synoptline} {synopt:{opt s:igma2(a)}}Use sigma^2 = a instead of the default. The default is to set sigma^2 to the mean of the estimated conditional variances. {synopt:{opt r:ange(b)}}Plot the news impact for z(t-1) = -b to +b instead of the default z(t-1) = -2 to +2. {synopt:{opt nog:raph}}Suppress display news impact graph. {synoptline} {title:Examples} {pstd}Setup{p_end} {phang2}{cmd:. webuse wpi1}{p_end} {pstd}Fit GARCH(1,1) and plot news impact curve{p_end} {phang2}{cmd:. arch D.ln_wpi, arch(1) garch(1)}{p_end} {phang2}{cmd:. newsimpact}{p_end} {pstd}Fit EGARCH(1,1) and plot news impact curve (yes, the curve is weird){p_end} {phang2}{cmd:. arch D.ln_wpi, earch(1) egarch(1)}{p_end} {phang2}{cmd:. newsimpact}{p_end} {title:Author} {pstd}Sune Karlsson, Ã–rebro University, Sweden{p_end} {pstd}sune.karlsson@oru.se{p_end}