*! version 1.1 2019-03-27
help newsimpact

News impact curve for ARCH models

Syntax

newsimpact [response news]
[,
sigma2(a)
range(b)
nograph]

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).

Optionally saves the variables for the x axis (news) and y axis (response) of the graph.

Options

option

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.

nograph Suppress display news impact graph.

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