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GARCH BEKK with example

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Occasional Contributor
Posts: 8

GARCH BEKK with example

Dear all,

I earlier posted 2 questions on multivariate garch, but got no response. I decided that my question might become more clear with an example

To make my question more clear: I am looking to do an analysis similar to the one in this paper: http://www.opf.slu.cz/kfi/icfb/proc2011/pdf/02_Arifin.pdf

You'd only have to check page 5 for the methodology and page 6 for the results.

Let's assume I have the same stock index return data as in this paper. How could I get the results in table 2, panel A and B, using VARMAX?

SAS Employee
Posts: 89

Re: GARCH BEKK with example

here is a response from the developer:

Given one data set containing two columns, exchangeRate and stockReturn (will need by groups for all countries in your example):

Proc varmax data=one;

   Model exchangeRate stockReturn = / p=1; /* VAR(1) with constant mean */

   Garch p=1 q=1 form=BEKK; /* BEKK GARCH(1,1) */

Run;

Note that in proc varmax, we calculate constant term, C’C, in garch equation in equation (2) as one symmetric matrix. If the user wants to repeat the paper, he can apply Cholesky decomposition on the constant matrix (by using IML for example).


I hope this helps.  Also, please contact SAS tech support should you require additional help getting started with VARMAX.

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